The Intellectual Edge

In search of the most valuable investing insights

[The Intellectual Edge @thebigideas_]

@PrivatEquityGuy I appreciate that Mike, glad you enjoyed it.

[Giuliano @Giuliano_Mana]

I struggled a lot to figure this out, but I think I got it.

Here's what mental models (or field-agnostic ideas) really are:

[The Intellectual Edge @thebigideas_]

@polymathinvest1 Hi Polymath,

I’m sad to have found out you’d blocked me on Substack — this is a bit of a shock as we hadn’t interacted before and I’d always enjoyed your content.

Please let me know if there’s a way we could resolve this.

All the best, and happy new year :)

[Giuliano @Giuliano_Mana]

After 2.5 years, I returned to this.

Left at 1992. Will now try to get to 2025.

This book is single-handedly worth courses, books, and whole degrees. I’m not even kidding. No one has amassed as much business/investing knowledge as Warren all throughout history.

[William Green @WilliamGreen72]

“Forecasts create the mirage that the future is knowable.” —Peter Bernstein

[Thomas Chua @SteadyCompound]

New Michael Mauboussin paper just dropped:

https://t.co/plrONv4AqS

[Kevin Gee @kevg1412]

Been thinking a lot about Michael Mauboussin's depiction of investing vs gambling again...

[Matthew Harbaugh @themattharbaugh]

Babe, wake up, new Howard Marks memo just dropped.

[Giuliano @Giuliano_Mana]

Ed Thorp is a true master at probability games and really an exceptional individual.

Notes and systems from his autobiography to think in new ways:

- 'It felt good to know that, just by sitting in a room and using pure math, I could change the world.'

- Guiding questions to make a decision:
1) If you do this, what do you want to happen?
2) If you do this, what do you think will happen?

- 'I was learning things out for myself, not limited by prompting from teachers, parents, or the school curriculum.'

- When he was thinking about beating roulette, he came across Feynman once and asked him if it was possible. Feynman said it wasn't.
Thorp was actually encouraged by that.

- A small change in a problem can transform it from easy to solve to unsolvable.

- 'The surest way to get rich is to play only those gambling games or make those investments where I have an edge.'

- Adjust how much to bet based on odds.

- When he tried to beat Blackjack, Thorp realized that the system could have infinite complexity. With that in mind, he set to simplify it, deleting rules and creating shortcuts.

- Betting too much, even when odds are in your favor, can be ruinous.

- Extreme events are real, account for them.

- People tend to make the error of seeing patterns or explanations when there aren't any.

- 'I preferred to treat LPs as I wish to be treated in their place'.

- If you can't make a rational case for why you have an edge, then you probably don't.

- 'What we learn from history is that we don't learn from history'.

- Education is like software for your brain.

- 'To preserve the quality of my life and to spend more of it in the company of people I value and in the exploration of ideas I enjoy, I chose not to follow up on a number of business ventures'.

[Oaktree @Oaktree]

In celebration of the 35th anniversary of @HowardMarksBook's memos, we released the first and only complete collection of all the memos in a single volume, from the first one in 1990 to the latest as of publication.

Read now: https://t.co/Mbjt9pqU1O

#AlternativeInvesting

[Mikro Kap David @david_katunaric]

.@BerkelKip flagged this to me today.

I knew it was a lot, but 75% is out of this world.

[The Intellectual Edge @thebigideas_]

ROIC Patterns and shareholder returns; sorting fundamentals and expectations.

More Mauboussin for your weekend reading:

[The Intellectual Edge @thebigideas_]

Yeah-for example where do you store your watchlists, where do you keep track of company updates, do you use screeners/ranking systems? How do you find new opportunities?

Koyfin's great. Interesting, thank you, Tiho.

Has AI become a larger part of your process? I'm still reluctant with it and haven't quite figured how to use it without sacrificing my own thought processes.

Thanks

[The Intellectual Edge @thebigideas_]

What platform do you guys use to research stocks?

(Ideally not too expensive and good data on small cap obscure stuff)

[The Intellectual Edge @thebigideas_]

@Ikkenospes Such enjoyable music. Autumn (what us Brits call fall) is so underrated, such a great time of year. Much easier to read and work when it’s a little cold outside.

[The Intellectual Edge @thebigideas_]

@Ikkenospes I’m glad.

Nice, I’m currently listening to both! Thomas Dybdahl is a new name for me; I love Hermanos Gutierrez.

Love it when the season changes and warrants a new genre a music to be heard.

[The Intellectual Edge @thebigideas_]

Distorted risk perception has always fascinated me.

We view risk inversely to its reality. When prices rise we relax our tolerance for risk, which is odd because a higher price comes with additional risk.

From Excess Returns

[The Intellectual Edge @thebigideas_]

In a paper by Mauboussin, he brilliantly goes through why the market is better viewed through the lens of a complex adaptive system.
Fascinating stuff.
Paper: Revisiting Market Efficiency: The Stock Market as a Complex Adaptive System