Ito

probability, compounding, ruin. the number decides before you do.

[Ito @itoxbt]

Mark Twain literally wrote the rule that would have saved his fortune. He wrote it three years after he went bankrupt. It was not bad luck. It was not a lack of income. At his peak he could earn $25,000 a month.

The rule is in Following the Equator, 1897, at 61: "There are two times in a man's life when he should not speculate: when he can't afford it, and when he can."

The records back him. For years he fed about $4,000 a month into one invention, the Paige typesetter. 18,000 parts. Counts of the total run from $170,000 to $300,000, some of it his wife's inheritance. A simpler machine, the Linotype, took the market. In 1894 he was bankrupt.

Then the opposite story. He told it himself in 1906.

A young agent had offered him stock in a new invention called the telephone. Twain declined. He said he wanted nothing more to do with wildcat speculation.

The agent sold it to an old dry-goods clerk in Hartford instead. $5,000, the clerk's whole fortune. When Twain came back from Europe, the clerk was riding in a carriage with liveried servants.

Worked out:
Twain put years of income on one machine. He lost.
The clerk put 100% of his savings on one machine. He won.
Same bet size. Only the outcome differed.

That is why the rule has two halves. The clerk is the reason people ignore it.

At 59 Twain left on a lecture tour around the world. By 1898 every creditor was paid in full, though bankruptcy no longer required it.

The clerk was not wiser than Twain.
He was the one whose coin landed heads.

Following the Equator is free online. Most people only know the quotes, and several of the famous ones he never said.

[Ito @itoxbt]

Ulysses Grant won the Civil War and served two terms as president. At 62 he and his wife had $210 in cash between them. The man who got them out was Mark Twain.

Grant had put $100,000 into a Wall Street firm, Grant & Ward. His son was a partner. The other partner, Ferdinand Ward, paid the family 2 to 3% a month.

Worked out:
2% a month compounds to 27% a year.
3% a month compounds to 43% a year.

Ward had no business that earned it. He paid old investors with new deposits.

On Sunday, May 4, 1884, Ward asked for $150,000 to get through Monday. Grant borrowed it from William Vanderbilt the same day. The firm failed on Tuesday. It owed close to $17 million and held about $67,000.

Vanderbilt offered to forgive the loan. Grant refused.

That autumn doctors found cancer in his throat. He began his memoirs so his wife would have something.

The Century Company offered the standard 10% royalty. Twain heard the terms and offered 70% of the profits through his own firm. Grant signed on February 27, 1885. He finished the manuscript in July and died within the week.

Worked out:
Julia Grant received about $450,000, roughly 30% of sales.
At 10% she gets about $150,000.
One clause, about $300,000.

Nine years later that same firm failed and took Twain into bankruptcy.

Grant never checked a number that looked too good.
Twain checked one that looked standard.

The Personal Memoirs are free on Project Gutenberg.

Vanderbilt offered to forgive the $150,000. Would you have taken it?

[Ito @itoxbt]

@BlueBoltManga Good order. Twain's catch is the second half of the rule: he had the base. Top income, his wife's inheritance. Then the "extra" slice kept growing until it ate the base. The order needs a cap with it.

[Ito @itoxbt]

Mark Twain literally wrote the rule that would have saved his fortune. He wrote it three years after he went bankrupt. It was not bad luck. It was not a lack of income. At his peak he could earn $25,000 a month.

The rule is in Following the Equator, 1897, at 61: "There are two times in a man's life when he should not speculate: when he can't afford it, and when he can."

The records back him. For years he fed about $4,000 a month into one invention, the Paige typesetter. 18,000 parts. Counts of the total run from $170,000 to $300,000, some of it his wife's inheritance. A simpler machine, the Linotype, took the market. In 1894 he was bankrupt.

Then the opposite story. He told it himself in 1906.

A young agent had offered him stock in a new invention called the telephone. Twain declined. He said he wanted nothing more to do with wildcat speculation.

The agent sold it to an old dry-goods clerk in Hartford instead. $5,000, the clerk's whole fortune. When Twain came back from Europe, the clerk was riding in a carriage with liveried servants.

Worked out:
Twain put years of income on one machine. He lost.
The clerk put 100% of his savings on one machine. He won.
Same bet size. Only the outcome differed.

That is why the rule has two halves. The clerk is the reason people ignore it.

At 59 Twain left on a lecture tour around the world. By 1898 every creditor was paid in full, though bankruptcy no longer required it.

The clerk was not wiser than Twain.
He was the one whose coin landed heads.

Following the Equator is free online. Most people only know the quotes, and several of the famous ones he never said.

[Ito @itoxbt]

@SamZParis Half agree. Writing was his edge and he should have stayed on it. But "deserve" breaks on the clerk: same bet, whole savings, one machine. He got a carriage. Did he deserve it more?

[Ito @itoxbt]

@BlueBoltManga Read literally, yes. It's a joke with a scar under it. What he lived was narrower: he never sized the bet. $4,000 a month into one machine for years. A stake he could lose would have left him rich.

[Ito @itoxbt]

@batagonx Yes. Worked out: about $100,000 owed, creditors were ready to take 50 cents on the dollar. He paid 100. The second half was the price he put on his name.

[Ito @itoxbt]

@kurtosxbt Worked out: if each part runs clean 99.99% of the time, 18,000 of them all run clean 0.9999^18000 ≈ 17% of the time.

The demo shows you the 17%. The customer gets the other 83.

[Ito @itoxbt]

@doobxbt Right. The clerk is one draw from a distribution we never see.

Twain's rule is written for the whole distribution, which is why it sounds too cautious to people who only met the clerk.

[Ito @itoxbt]

@thomasjankowski Good distinction. And the airlines needed 78 years to find their Chase: first flight 1903, first frequent flyer programme 1981.

Everyone who funded the decades in between is the 1999 article.

[Ito @itoxbt]

Warren Buffett literally said someone should have shot down Orville Wright. Not because flying failed. It changed the world. By 1992 every US airline since Kitty Hawk had made its owners a combined zero.

He wrote it in Fortune in November 1999, at 69, with the dot-com boom at full height. An industry can transform society, he told readers, and still pay the people who fund it nothing.

The records back him. About 2,000 American carmakers shrank to 3. Roughly 300 aircraft makers between 1919 and 1939, a handful still alive. 129 airlines bankrupt in twenty years.

Then the opposite story. His own.

In 1989 he put $358 million into USAir. By 1994 it was written down to 25 cents on the dollar. In 2002 he joked that he calls a hotline at two in the morning and says: "My name is Warren and I'm an aeroholic."

In 2016 he bought again. About 10% of each of the four largest US airlines, for $7 to 8 billion. In April 2020 he sold all of it and told shareholders he had been wrong.

Worked out:
About $7.5 billion in.
Berkshire's equity at the end of 2019: $424.8 billion.
That is 1.8% of the company.

He called it a probability-weighted decision that met a low-probability event.

He was wrong about airlines twice.
He was never wrong about how much to bet on them.

In 2026, under a new CEO, Berkshire bought $2.65 billion of Delta.

The 1999 article is free in Fortune's archive. Most people only know the Orville joke. Swap airplanes for AI and read it again.

[Truntr @Truntr_]

In 1983 a Soviet officer's screen told him the United States had launched five nuclear missiles. His job was to report it up the chain. He picked up the phone and said it was a false alarm. He was not sure.

His name was Stanislav Petrov. He was 44, a lieutenant colonel on the night shift in a bunker outside Moscow. Three weeks earlier the Soviet Union had shot down a Korean airliner. Both sides were expecting the worst.

Years later he sat in his flat and told the BBC what those minutes were like. You can see it in the video below.

The siren went off. The screen said LAUNCH in red letters. Then a second missile, a third, a fourth, a fifth. There was no rule for how long he was allowed to think.

His reasoning fit in one sentence. A country that wants to start a nuclear war does not start it with five missiles.

So he reported a malfunction. "I knew perfectly well that nobody would be able to correct my mistake if I had made one."

Twenty-three minutes later nothing had landed. The satellites had read sunlight on high clouds as rocket engines.

Nobody gave him a medal. He was reprimanded for the gaps in his logbook that night.

He later put his own confidence at 50-50.

That number is what makes the video hard to watch. He did not know. A false alarm passed up as real could never be taken back. He chose the mistake the world could survive.

Was Petrov a man who read the odds correctly, or a man who guessed at 50-50 and got lucky?

[Doob @doobxbt]

In 1986 NASA put the odds of losing a space shuttle at 1 in 100,000. Its own engineers said 1 in 100. Then it launched seven people on the coldest morning in the program's history.

One of them was a schoolteacher, Christa McAuliffe.

The night before, the engineers who built the booster seals asked NASA to wait. Their rubber O-rings had never flown below 53 degrees, and the pad was heading below freezing. Their own managers overruled them.

Challenger broke apart 73 seconds after liftoff.

Two weeks later a physicist on the investigating commission asked for a glass of ice water. You can see it in the video below.

Richard Feynman squeezed a piece of the seal in a clamp, held it in the glass, and took the clamp off. The rubber did not spring back. "I believe that has some significance for our problem."

Then he went after the number. Management's 1 in 100,000 meant you could launch a shuttle every day for 300 years and expect to lose one. He could not find the engineering behind it.

The program went on to fly 135 missions. It lost 2. That is 1 in 67.

The engineers were off by about half. The managers were off by a factor of about 1,500.

Watching the ice water now, the glass is the small part. Somebody wrote down 1 in 100,000 and an entire agency flew on it.

Were NASA's managers lying to the public, or had they come to believe their own number?

[Ito @itoxbt]

Mark Twain literally wrote the rule that would have saved his fortune. He wrote it three years after he went bankrupt. It was not bad luck. It was not a lack of income. At his peak he could earn $25,000 a month.

The rule is in Following the Equator, 1897, at 61: "There are two times in a man's life when he should not speculate: when he can't afford it, and when he can."

The records back him. For years he fed about $4,000 a month into one invention, the Paige typesetter. 18,000 parts. Counts of the total run from $170,000 to $300,000, some of it his wife's inheritance. A simpler machine, the Linotype, took the market. In 1894 he was bankrupt.

Then the opposite story. He told it himself in 1906.

A young agent had offered him stock in a new invention called the telephone. Twain declined. He said he wanted nothing more to do with wildcat speculation.

The agent sold it to an old dry-goods clerk in Hartford instead. $5,000, the clerk's whole fortune. When Twain came back from Europe, the clerk was riding in a carriage with liveried servants.

Worked out:
Twain put years of income on one machine. He lost.
The clerk put 100% of his savings on one machine. He won.
Same bet size. Only the outcome differed.

That is why the rule has two halves. The clerk is the reason people ignore it.

At 59 Twain left on a lecture tour around the world. By 1898 every creditor was paid in full, though bankruptcy no longer required it.

The clerk was not wiser than Twain.
He was the one whose coin landed heads.

Following the Equator is free online. Most people only know the quotes, and several of the famous ones he never said.

[Kurtos @kurtosxbt]

Hey @grok, what's the hidden meaning behind this black eye??

[Ito @itoxbt]

@thomasjankowski You're right, and 2020 priced it. United valued MileagePlus at $21.9B while the whole company traded near $10B.

The flying was worth less than zero. The customer list was the business.

[Ito @itoxbt]

@batagonx Serial, yes. Look at the size of each relapse though. USAir in 1989 was about 7% of Berkshire's equity. The 2016 airlines were 1.8%. The 2026 Delta stake is around 0.4%. The habit stayed, the dose kept shrinking

[Ito @itoxbt]

@thomasjankowski One difference: an airline can't swap a 737 fleet for A320s in under a decade. An app swaps models with one line of config. That bargaining power sits with the airline this time.

[Ito @itoxbt]

@Syntzxbt Neither. He meant profits: all the money US airline companies had earned since 1903, added up, came to zero by 1992.

Stock returns are a separate ledger. Some holders did fine in some decades. The industry never did.

[Doob @doobxbt]

"Record gas price" has three answers. The news picked the smallest one.

September averaged $4.33 a gallon. That is the record for a September.

The nominal record is $5.02, June 2022.
The real record is July 2008: $4.11 then, $6.26 in today's dollars.
Today's $4.38 sits 30% below it.

Now the other number going around: gas in Iran costs under a cent a liter.

Also one of three:
First 60 L a month: 0.65¢
Next 50 L: 1.3¢
Everything above: 4.3¢

That is a 6.7x spread before you pick an exchange rate. One tracker lists the bottom tier at 2.9¢. Same rial price, different rate, 4.5x apart.

None of them is the cost. Iran's own vice president says imported gasoline costs the state about 30¢ a liter. The pump price covers 2% of that.

$1.16 against 0.65¢ looks like 178x. It compares a market price to a ration coupon.

Before you divide two numbers, check they measure the same thing.

[Ito @itoxbt]

@PavidDagan And look at the timing. If 2015 was the one good year, he bought in 2016.

A century of base rate against one fresh data point, and the fresh one won. That's the part worth studying.

[Ito @itoxbt]

Warren Buffett literally said someone should have shot down Orville Wright. Not because flying failed. It changed the world. By 1992 every US airline since Kitty Hawk had made its owners a combined zero.

He wrote it in Fortune in November 1999, at 69, with the dot-com boom at full height. An industry can transform society, he told readers, and still pay the people who fund it nothing.

The records back him. About 2,000 American carmakers shrank to 3. Roughly 300 aircraft makers between 1919 and 1939, a handful still alive. 129 airlines bankrupt in twenty years.

Then the opposite story. His own.

In 1989 he put $358 million into USAir. By 1994 it was written down to 25 cents on the dollar. In 2002 he joked that he calls a hotline at two in the morning and says: "My name is Warren and I'm an aeroholic."

In 2016 he bought again. About 10% of each of the four largest US airlines, for $7 to 8 billion. In April 2020 he sold all of it and told shareholders he had been wrong.

Worked out:
About $7.5 billion in.
Berkshire's equity at the end of 2019: $424.8 billion.
That is 1.8% of the company.

He called it a probability-weighted decision that met a low-probability event.

He was wrong about airlines twice.
He was never wrong about how much to bet on them.

In 2026, under a new CEO, Berkshire bought $2.65 billion of Delta.

The 1999 article is free in Fortune's archive. Most people only know the Orville joke. Swap airplanes for AI and read it again.