It’s the people who go to work not worrying about office politics that change the world.
I found this on X today:
In a weird way, everybody is rooting for you. When you go to a job interview, the interviewer wants you to be amazing so they don’t have to look anymore. When you go on a date, the person wants to have an amazing date with you. If you make a piece of content, people want to see amazing pieces of content and they have no problem if it’s yours.
The instant you get into the mindset that people want you to do well, your entire world gets better. And you’ll be shocked to know this pattern keeps repeating in different areas of life.
Never rush into identifying with something. An identity latches onto us like a piece of flesh. Once on, it is painful to strip away, so we leave it attached, even when it starts rotting or turns cancerous.
People who are too hasty to identify with groups, causes, or beliefs tend to absorb ideas from the community without filtering them. Identities are useful because they provide us with a sense of belonging. They give us comfort, knowing that we are part of a greater whole or cause, which likely stems from our primal instincts. We are incentivised to agree with the group because compliance is easy and avoids internal friction. The result is often herd mentality and echo chambers. The longer you stay in one, the more deeply it embeds into your identity, the tighter its grip becomes, and the more agonising it is to shake off. Eventually, you may start justifying misdeeds committed by your community, or worse, joining in on them. Because critical thinking is not incentivised, you can lose that as well. This closely parallels Stoic philosophy, particularly its warning against tethering our character and reason to external attachments.
Others identify heavily with their jobs or schools. They proudly wear their company’s logo or their school tees, and association with a reputable brand can indeed elevate an individual’s perceived status. However, it is vital to remember that these associations are fickle. A company might fire you the moment you stop providing value, and school prestige fades quickly in the company of people who couldn’t care less about credentials. Identities are a double-edged sword.
Good stuff from Li Lu’s talk at Columbia’s 36th Annual Graham & Dodd Event:
- Almost all intelligent investing is value investing.
- AI serves as a great synthesiser and equaliser, rather than a replacement for human judgement.
- Great, competitive companies can be found at attractive prices during stagnant periods (his example was China’s market over the past decade) by maintaining a rational investor perspective.
- Either you think the market is there to instruct you or to serve you.
- You get what you deserve in the end.
If software engineering and mathematics are representative of generic problem solving, the fact that AI is rapidly conquering them (the very fields closest to home for AI researchers, and thus trained on first) means the rest of knowledge work is likely to meet the same demise.
If so, jobs with an element of human connection are likely to become more important than ever before, with roles such as doctors and teachers thriving in the future. If human connection becomes the bottleneck in efficiency, companies most adept at human connection work should see their value rise. In there somewhere, human connection companies disguised as software engineering companies could do well, such as CSU (Constellation Software), whose edge lies in earning the trust of founders looking to sell businesses with sticky customer bases.
I feel like I’m sitting under an apple tree heavy with fruit, craving an apple, but too preoccupied counting ants.
In today’s world, it’s easier than ever to have an opinion.
Humans are social animals, and we feel most comfortable siding with the majority. Before we had social media or the internet, it was much more difficult to figure out if the masses agreed with you and whether the opinion you held was deemed “socially acceptable” at the time simply because we were exposed to so few around us. It was much more difficult to “borrow” an opinion from the masses as well. Today, people can wake up thinking they need to have an opinion about XYZ that’s trending, go online, read some comments, identify the dominant narrative, and side with it.
Having this newfound opinion feels good. It makes us feel as if we are siding with something greater than ourselves, that we are a part of a movement and we stand with the “cool, enlightened folks” who will shape tomorrow. Perhaps, it’s the silent hand of the media growing up that taught us in subtle ways to always side with those who seem “revolutionary” and to side with heavily emotion-driven narratives. The men in suits are so often cast as evil; we learn to romanticise villains; we are taught simple implications i.e. X+Y->BAD! because that makes movies easier to understand. Nuance is far too often thrown out of the window because complicated plots don’t sell well and consumers are not satisfied with an indefinite outcome.
It’s much easier today than it was before the internet to identify with communities/groups who are riding the wave of popularity, side with them, and then feel as if we are part of a greater cause. It boosts the ego, makes us feel important, and gives us a rush of adrenaline. But it’s crucial to remember that much of the internet is guided by the ubiquitous hand of algorithms finely tuned to prey on your emotions and keep your attention — even if that means deviating you from a balanced view. It’s important for impressionable young folks eager to feel like they belong in a community, to learn when they are being used for their naivety and recklessness.
I think it’s fair to say that no one is truly altruistic. It just depends on whether what benefits you, benefits them as well. This could be as innocent as a mother’s love for a child, where seeing the child happy makes her happy. If every motive counts as self-interest, this can’t be proven wrong, so I hold it as a useful lens rather than a proven fact. Or it can be as insidious as opportunists who weaponise that very hunger for belonging. When someone hands you a neatly packaged enemy and an easy banner to march behind, it could very well be that they couldn’t care less about the narrative that they are pushing. But it nonetheless serves as a very good tool to control the minds of crowds to do their bidding.
All you are rewarded with is a cheap dose of misguided moral superiority.
Emotions aren’t bad. They guide us toward what matters, but they are not the truth. Notice when you’re being fed a simplified narrative for clicks and outrage, lest you be played for a fool.
Emic is an insider’s view of a culture, while etic is an outsider’s scientific view. [1]
This is important for all market research. We need to think from the customer’s point of view.
Marketing has to address a concern or motivation that already matters to the target audience. Most customers don’t care how clever a solution is.
Many people use the fear of over-reliance as an excuse to avoid learning how to use AI properly, treating those who do with disdain and contempt. I disagree. That’s like saying we shouldn’t use cars because we will lose the skillset of taking care of horses.
I believe we should embrace and adapt to new technologies as they come, while being mindful of the downsides (such as losing skills we still need) and using the latest technology to help us get better at achieving our goals in life. Back to the horse and car example, our goal is to get to our destinations, not to be overly competent at a sub-optimal alternative.
One way to think about why a stock can appreciate in price is that its price reflects the consensus expectation of the company’s future growth, and that consensus can be wrong.
The variant view of a successful investor is being able to stand independent of the market, identify a company whose future growth as determined by the consensus is wrong, and arrive at a more accurate analysis of the business.
In other words, it is akin to identifying a money printer that prints $10 every time when everyone else thinks it only prints $5. You do not just need to find a good business; you need to find an expectation gap where you are both different and right.
Differentiating the why, what, and how:
- Why: We need energy to go about our lives.
- What: We need to eat food to get that energy.
- How: Find a recipe, buy the ingredients, cook the meal, chew, and swallow.
I found this on Reddit today:
After first 2–3 millions, a paid off home and a good car, there is no difference in quality of life between you and Jeff Bezos. Both of you have limited amount of time on earth — you have twice if not more than Jeff, so you are richer than him. A cheese burger is a cheese burger whether a billionaire eats or you do.
Money is nothing but a piece of paper or a number in your app. Real life is outdoors.
Become financially independent that’s usually 2–3 M. Have good food. Enjoy the relations. Workout and enjoy sex. Sleep well. Call your parents. That’s all there is to life. Greed has no end.
Repeat after me. Time is the currency of life. Money is not.
Sooner you figure this out, happier you will be.
An interesting 8 qns proposed by ChatGPT to achieve the same 30 second mind as the great late Charlie Munger:
-
What is the actual problem?
Strip away symptoms, wording, and noise. What are we really trying to solve? -
What must be true?
What assumptions does my conclusion depend on? Which ones are facts vs guesses? -
What are the incentives?
Who benefits from what? What behaviour do those incentives predict? -
What usually happens?
Ignore the story for a moment. What does the base rate / reference class say? -
What is the dominant variable?
Of everything going on, what 1–2 factors actually determine the outcome? -
How could this fail?
Invert the problem. Look for ruin, hidden risks, weak links, and ways you’re wrong. -
And then what?
Follow the consequences another 1–2 steps. Second-order effects often reverse the obvious answer. -
Compared with what?
Every decision has an opportunity cost. Is this actually better than the next-best alternative?
Capture the minds of the masses, and you can steer the actions of leaders. The majority is often right thanks to collective intelligence when people judge independently, but the crowd is still easily manipulated by half-truths, emotional arguments, and groupthink.
“Whenever you find that you are on the side of the majority, it is time to reform (or pause and reflect).” - Mark Twain
Q: Why do stocks have a multiple (i.e., P/E, P/FCF, EV/NOPAT)?
A: Owning a business means you’re ultimately entitled to your share of the residual cash it generates from now till judgement day (unless ofc, you choose to sell it later). The multiple mostly reflects how much future cash flow investors think the company will earn, and this is affected by what they determine to be the longevity and growth of the company’s earning power, as well as the risks involved.
Q: How do stocks become multi-baggers (i.e., stocks whose price appreciates by multiples)?
A: The two main engines for share price appreciation are earnings growth and multiple expansion. Let’s simplify by keeping things constant. Suppose a lemonade stand earns $1 in Year 1, and $1 in Year 2, and $1 every year after that. Year-over-year earnings growth is 0%. If investors collectively determine, through market forces, that the P/E is to be 10, the price of this lemonade stand company will remain at around $10, assuming everything else stays constant. Now consider what happens if the P/E increases to 20 five years from now. Over 5 years, the company appreciates in price from $10 ($1 * 10) to $20 ($1 * 20). That makes for a CAGR of ~15% a year (rule of 72: it doubles roughly every 5 years). So multiple expansion alone can make you a wealthier owner of the company.
The same scenario applies to earnings growth, where you keep multiple effects constant (i.e., keep it at a P/E of 10 five years from now), and set earnings growth per year at ~15%. You’ll notice that your earnings have about doubled in 5 years, and if you multiply the same P/E of 10 by it, you’ll get a similar doubling in the price of the company.
So far it’s all quite straightforward, as we witness a linear relationship between the share price and either the multiple or earnings, assuming the other is kept constant in each thought experiment. Here’s where the twin engines of share price appreciation become more than a simple additive relationship. So far, we have understood that Price of the company in any year = Earnings Multiple (aka P/E) * Earnings (which is affected by earnings growth). If, by the time you intend to sell the company (say, 5 years from now), both the earnings multiple and earnings have grown and are now p% and q% higher respectively than they are today, this means that (1+r) Today’s Company Price = (1+p) Today’s Earnings Multiple * (1+q) Today’s Earnings.
Simplifying, this implies that (1+r) = (1+p)(1+q). r, which is your percentage increase in share price over those 5 years, becomes p + q + p * q. Now this p * q is the secret ingredient. It creates an additional multiplicative effect. So next time you think earnings grew 10% over 5 years and P/E increased 10% from 10 to 11, the share price doesn’t just increase by a linear 10% + 10% = 20%. Instead, it grows by 21%. If we increase the inputs slightly to a 15% increase in earnings and the earnings multiple, we get 32.25% (15% + 15% + (15% × 15%)). Notice how that extra 2.25% purely comes from the interaction between the two engines.
All this is really pointing towards the core idea behind value investing and finding stocks that return 1x/2x/5x/10x/100x: Find companies trading below what they are worth (Price < Value), which leaves room for the multiple to expand (p), and, ideally, buy them early while their earnings are still growing significantly (q), so both engines work for you. It’s important to note here that the definition of cheap is highly debated, and the accurate assessment of value is what separates a rookie from a professional. An earnings multiple is often criticised for being a simple and potentially misleading gauge of value when used alone.
Never forget that the two engines compound on the way down just as they do on the way up.
If a company experiences a 30% drop in earnings (q = -0.30) and a simultaneous 30% contraction in its multiple (p = -0.30), the math doesn’t result in a linear 60% loss. Instead, plugging it into our formula:
r = (-0.30) + (-0.30) + (-0.30 × -0.30)
r = -0.60 + 0.09 = -0.51
The share price plummets by 51%. The interaction term softens the blow slightly here, but a 51% loss still needs a gain of about 104% just to break even.
If the drop is a more severe 50% cut to both earnings and the multiple, the destruction is massive:
r = (-0.50) + (-0.50) + (-0.50 × -0.50)
r = -1.00 + 0.25 = -0.75
You lose 75% of your capital. When both engines reverse, they work against you simultaneously, leaving you with a fraction of your wealth after what may have initially seemed like a standard business slowdown.
This is especially prevalent in stocks that are trendy or that have already seen a sharp price appreciation. While it’s true that such sentiment upshifts are often due to underlying improvements in the business, they can get blown out of proportion by momentum, opportunistic traders and gullible retail investors. If something seems like a no-brainer based purely on backward-looking price charts, chances are that some of the best days to invest in the company may already be over, in the short term at least. There are, of course, as is always the case, exceptions to this idea.
Remember: Sentiment is fickle. This also means that some of the best opportunities to invest in a company often appear when things are uncertain, uncomfortable and there is little evidence in the price charts to back the idea up. The hint is instead hidden in the business operations.
Q: How do professional investors estimate what a company is worth?
A: What I’ve seen professional investors do is that, after conducting a deep dive into the company’s history, operations and management (aka understanding the business almost as well as if they owned it), they proceed to construct a detailed financial model for a few years into the future. They typically label these future columns with an “E” for “estimate” or “expected”. Then, based on their deep understanding of the company, they predict how each line item might turn out in the future.
It’s probably important to note here that, as any student of probability theory knows, the more precisely you try to predict, the more variables you try to get right, and the further into the future you try to forecast, the less likely you are to be correct.
However, this exercise allows the investor to further deepen their understanding of the company, identify the key drivers of future business performance, and see what could potentially jeopardise the company in the future.
The exercise is ultimately meant to arrive at a more informed, and hopefully more accurate, estimate of the future cash flows that the company is likely to churn out, assign a reasonable earnings multiple at the end of the prediction period (unless the model forecasts into perpetuity), and allow the investor to better monitor the stock when future earnings reports come out.
All this helps the investor understand what the business is likely worth today and whether its current market price is trading at a discount to that estimated value.
The final product of this analysis is often an estimate of the investment’s expected IRR for your portfolio. In other words, based on your assumptions, how much is this stock likely to increase in value each year from your current entry price? This estimate is based on the future cash flows and value of the business, rather than simply extrapolating its past share price performance.
Q: What is a hurdle rate?
A: Investors also have what we call a hurdle rate, which is the minimum yearly return that the investor is willing to accept for a stock to be included in their portfolio.
This can be as simple as identifying what your financial goals are. If you want to double your money every 5 years, you need a hurdle rate of roughly 15% (rule of 72: 72 / 15 = ~5).
Having a clear hurdle rate, and the discipline to stick to it, helps prevent you from buying investments that may be good businesses but are unlikely to generate the returns your portfolio requires.
tldr: Share price appreciation is driven by twin engines: earnings growth (q) and multiple expansion (p). Because (1+r) = (1+p)(1+q), their combined impact is multiplicative (p * q), making it rewarding on the way up and painful on the way down. Professional investors value businesses by modelling future cash flows and expected IRR to find stocks trading below intrinsic value, then filter for those meeting their portfolio's hurdle rate (minimum required annual return) to stay disciplined.
When we use them to write software, LLMs function as translators from human language to computer code. A translator must understand the speaker’s intention, but a translator can never replace the speaker, because the speaker is the one who decides what is worth building and why.
Notes and key takeaways from CNA: The habits draining your energy at work and how to fix them.
TL;DR
Midday crashes often aren’t down to sleep debt alone. Heavy lunches, eating at your desk, scrolling on breaks, and constant notifications can all add to them.
3 Key Fixes
- Fuel Right and Leave Your Desk: Swap heavy carbs for protein and vegetables, and step away from your workspace during lunch.
- Active Rest Over Scrolling: Re-energise with a 5-minute walk or eye break (20-20-20 rule) instead of social media.
- Control Inputs: Shift caffeine intake to earlier in the day and mute non-essential notifications to reduce mental fatigue.
I recently watched Christopher Nolan’s The Odyssey, and here are some quotes that I loved:
The clearest view of a man is from below.
This made me go wow and reminded me of the common saying: judge a man by how he treats those less fortunate than him.
You’re a man who needs to control his fate, but you cannot control this. […] Give up the fight. Give up control. And live.
What you most want is what you most can’t have, and what you most can’t have is what you already had and lost.
We tend to accept what we think we deserve. Stephen Chbosky put it as “We accept the love we think we deserve” in The Perks of Being a Wallflower.
Our standards, choices, and boundaries are largely a reflection of our internal sense of self-worth. When we raise our expectations of what we are worthy of, what we choose to tolerate naturally changes as well.
I missed you today, but no one knew.
I didn’t cry tears and I didn’t look blue.
Nobody thought I seemed slightly askew.
I walked all through the day thinking all about you.
I missed you today and nobody could tell.
I felt heavy and sad, but I covered it well.
I laughed out loud at jokes, didn’t once undersell.
Barely got through the day and I hurt like hell.
I missed you today, but I did it so quiet.
No one knew I was selling, but made everyone buy it.
Thought of you every second, didn’t try to deny it.
It might have seemed small, but to me it felt giant.
I missed you today from the morning to night.
From my dawn alarm clock till I closed both my eyes.
You drove with me to work, helped me turn out my lights.
It looked like a breeze, but it felt like a fight.
I missed you today and it made me wonder.
If I feel like this, then there must be others.
Making grief look like sunshine when it feels like thunder.
How many I spoke to also gained full thunder.
I missed you today and will every day too.
Still discreetly miss theirs and I’ll softly miss you.
We’ll see all the colours of the black and white hue.
And that is just something that grief will do.
This poem is from an Instagram reel, and it resonated deeply with me.
Wouldn’t it be great if AI could generate videos using other videos as references? That way, the movement in generated videos could resemble real life more closely. For example, imagine a generated video of your dog moving just as she does in real life.
Such a joy to watch videos like this. Ikea’s philosophy reminds me of Costco.
Terravest has been buying back shares under its normal course issuer bid after the fiasco with Charles Pellerin caused a sharp contraction in share prices.
Recall this snippet from Chris Waller’s writeup on TerraVest:
Terravest also buys back stock from time to time, viewing the attractiveness of a buyback as about judging the return from its stock rising to intrinsic value vs the more certain return from making an internal investment. The company has not been afraid to aggressively buy back stock when it is trading well below intrinsic value, buying back 36% of shares outstanding in 2012.
Management usually knows the business better than outside shareholders, and its record suggests it buys back stock when it believes shares trade well below intrinsic value. If that judgement is right, this buyback creates value for the remaining shareholders.
DCF valuation with wishful inputs is as good as saying “if I’m able to make a million dollars by year 5, I will be a millionaire.”
Valuation framework by Joel Tillinghast (from Big Money Thinks Small):
-
Relate the Discount Rate to FCF Yield (using the Gordon Growth model):
Discount Rate = FCF Yield + FCF Growth RateRearranging this gives the FCF yield to require at your chosen discount rate:
FCF Yield = Discount Rate - FCF Growth RateThis only holds if growth is steady over the long run and below the discount rate.
-
Calculate the Reinvestment Rate: Use the Return on Equity (ROE) earned on reinvested earnings to identify the portion of earnings that must be reinvested to achieve FCF growth:
Reinvestment Rate = FCF Growth Rate / ROE -
Determine the FCF Fraction of Earnings: The remaining portion of earnings that represents free cash flow:
FCF Fraction = 1 - Reinvestment Rate -
Calculate Value: Use the FCF Yield derived in step 1 to value the FCF fraction of earnings:
Value = (Earnings * FCF Fraction) / FCF YieldOr expressed as an implied P/E multiple:
Implied P/E = (1 - Reinvestment Rate) / FCF Yield
Comparison is the thief of joy, yet it is woven into the very fabric of society. Think of rankings at work, in sports, and in advertisements, where we are constantly reminded of what we lack and taught what we should want. It is time we realise that what is valuable to others may not be the same for us. Our unique lived experiences shape our mindsets and determine what holds value. Joy, sorrow, and success are deeply personal and build upon one another. Many of our actions today can be traced back to past experiences that shifted our way of thinking.
The next time social media, our friends, or even our loved ones compare us with others, we ought to take a step back and introspect. We must remind ourselves that they are evaluating us through their own lenses and experiences, not ours. Stop living your life based on what someone else has determined to be a life well-spent. That’s their business, and that’s how they should live their lives if they choose to. We ought to be indifferent. Every decision has a value and a trade-off as we define it.
It’s important that we determine today what is of value to us; knowing our destination will help us make sense of the journey.
This quote beautifully put into words what I had in mind for a while:
“Most people do not think. They repeat. They adopt the opinions of those around them, wear them like borrowed clothes, and call it a worldview. And when you dare to think for yourself, really think, they will not admire you for it. They will resent you. Because your refusal to conform is a mirror they did not ask to look into. The unexamined man does not hate you because you are wrong. He hates you because somewhere beneath the noise, he suspects you might be right.” - Anonymous
P.S. Someone attributed this to Nietzsche, but I can’t seem to find evidence backing it, so I’ll keep it as anonymous.
Life is what happens in the in-between. We have convinced ourselves to live for big moments such as graduations, promotions, and travel, but what we often end up feeling most nostalgic about are the little moments that seem insignificant in the present but make up a large part of the story looking back. Do not neglect what you have in the present by constantly occupying your mind with thoughts of the future.