Zely @0xZely - Twitter Profile

Zely

@0xZely

about 9 hours ago

@vanvster agree with u

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Zely

@0xZely

about 9 hours ago

A French-Polish mathematician published a paper in 1963 that proved every risk model on Wall Street was built on a formula that does not describe real markets. The industry ignored him for forty years. Then Long-Term Capital lost $4.6 billion in six weeks. Bear Stearns evaporated in seventy-two hours. Lehman went bankrupt. AIG needed $182 billion in taxpayer money. Every one of them ran on the formula he had disproved four decades earlier. His name was Benoit Mandelbrot. He is dead. Your 401k still uses the model he disproved. The 72-minute lecture in this video is Mandelbrot himself explaining the math on a Yale blackboard. The bell curve, invented by Carl Friedrich Gauss in 1809, assumes prices move like a drunk man stumbling home. Small steps in random directions. Extreme moves so rare they can be ignored for pricing options, sizing positions, and calculating value at risk. Every major risk model taught in finance since 1970 rests on that assumption. Mandelbrot spent his career at IBM Research measuring actual market data instead of assumed distributions. Cotton prices from the 1900s. Wheat prices from the 1500s. Stock returns from every exchange he could get his hands on. None of them followed the bell curve. They followed what he called a fractal distribution. Long stretches of nothing. Then everything at once. A 3am gap through four standard deviations of your stop-loss before dawn. The bell curve says a 10-sigma market move should occur once every trillion years. Real markets deliver one about every decade. Mandelbrot published the paper in the Journal of Business in 1963. Every major business school kept teaching the bell curve anyway because their entire framework broke without it. Fifty years later Nassim Taleb wrote "The Black Swan" based almost entirely on Mandelbrot's insight. It sold three million copies. Wall Street ordered thousands, put them on shelves, and kept using the bell curve because switching would mean admitting decades of models were priced wrong. Every crash since 1987 has been a Mandelbrot event that the bell curve said could not happen. "The bell curve is a very poor way of describing the behavior of markets." That is Mandelbrot in a 2005 interview. He was 81, retired, and openly furious. Almost every mainstream retirement account, insurance policy, and pension fund still runs on Gaussian assumptions Mandelbrot disproved before the manager was born. The lecture is free on YouTube. Mandelbrot's book "The Misbehavior of Markets" is under $15. The math is free. The willingness to admit your risk model is describing a market that does not exist is a much rarer commodity than money.

Zely

@0xZely

2 days ago

https://t.co/3fdv0qocoy

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0xZely retweeted

Zely

@0xZely

1 day ago

The most surprising stock recommendation Warren Buffett ever accepted came from a Chinese refugee sitting on Charlie Munger's living room sofa in 2003. The stock turned Berkshire's $232 million position into over $8 billion in fourteen years. His name is Li Lu. The stock was BYD. Li Lu is 58 today. He runs Himalaya Capital, a hedge fund almost nobody outside the top of Wall Street has heard of. It has compounded at roughly 20 percent a year for twenty-five years. Charlie Munger invested his personal wealth with Li Lu from 2004 until his death in 2023. The 2.5-hour clip in this video is Li Lu lecturing on the history of Chinese and Western civilization at his own office. It is in Mandarin with subtitles. It is on YouTube. Li Lu was 23 in June 1989, leading the student protests at Tiananmen Square. When the tanks arrived he was on China's most-wanted list. He escaped the country with help he has never publicly named, arrived in the United States with almost no English, and enrolled at Columbia University the next year. He then did something no other student in Columbia's history has done. He earned three degrees simultaneously. A bachelor's in economics, a JD, and an MBA. All finished by 1996. He started Himalaya Capital in 1997 with money saved from Wall Street internships. In 2003 a mutual friend introduced him to Charlie Munger. Munger sat down expecting a five-minute meeting. It lasted the entire day. By the end Munger had decided Li Lu was the only outside investor he had ever met who deserved his own family fortune. Munger later called Li Lu "the Chinese Warren Buffett." Buffett himself has said Li Lu is one of the few managers he would trust with Berkshire's cash after he and Munger are gone. Li Lu has published exactly one book. It is a series of sixteen lectures on the modernization of civilization. The YouTube compilation is roughly the length of a graduate seminar and is free. He has almost never given a public interview. Every business school on earth teaches the Buffett-Munger framework and charges tens of thousands of dollars for the privilege. The one man both of them individually picked above every hedge fund manager alive gives his own version in Mandarin on YouTube for nothing. Almost nobody who quotes Munger in a boardroom has watched a minute of it. The lecture is free. The book is under twenty dollars. The willingness to sit through a graduate seminar in a second language before making a serious allocation decision is a much rarer commodity than the network to hear one exists.

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Zely

@0xZely

1 day ago

The most surprising stock recommendation Warren Buffett ever accepted came from a Chinese refugee sitting on Charlie Munger's living room sofa in 2003. The stock turned Berkshire's $232 million position into over $8 billion in fourteen years. His name is Li Lu. The stock was BYD. Li Lu is 58 today. He runs Himalaya Capital, a hedge fund almost nobody outside the top of Wall Street has heard of. It has compounded at roughly 20 percent a year for twenty-five years. Charlie Munger invested his personal wealth with Li Lu from 2004 until his death in 2023. The 2.5-hour clip in this video is Li Lu lecturing on the history of Chinese and Western civilization at his own office. It is in Mandarin with subtitles. It is on YouTube. Li Lu was 23 in June 1989, leading the student protests at Tiananmen Square. When the tanks arrived he was on China's most-wanted list. He escaped the country with help he has never publicly named, arrived in the United States with almost no English, and enrolled at Columbia University the next year. He then did something no other student in Columbia's history has done. He earned three degrees simultaneously. A bachelor's in economics, a JD, and an MBA. All finished by 1996. He started Himalaya Capital in 1997 with money saved from Wall Street internships. In 2003 a mutual friend introduced him to Charlie Munger. Munger sat down expecting a five-minute meeting. It lasted the entire day. By the end Munger had decided Li Lu was the only outside investor he had ever met who deserved his own family fortune. Munger later called Li Lu "the Chinese Warren Buffett." Buffett himself has said Li Lu is one of the few managers he would trust with Berkshire's cash after he and Munger are gone. Li Lu has published exactly one book. It is a series of sixteen lectures on the modernization of civilization. The YouTube compilation is roughly the length of a graduate seminar and is free. He has almost never given a public interview. Every business school on earth teaches the Buffett-Munger framework and charges tens of thousands of dollars for the privilege. The one man both of them individually picked above every hedge fund manager alive gives his own version in Mandarin on YouTube for nothing. Almost nobody who quotes Munger in a boardroom has watched a minute of it. The lecture is free. The book is under twenty dollars. The willingness to sit through a graduate seminar in a second language before making a serious allocation decision is a much rarer commodity than the network to hear one exists.