The Icarus Paradox offers a critical lesson on business, investing, and life.

Here’s a simple breakdown:

THREAD: The story of the week in finance is how a group of retail traders at @wallstreetbets, with assists from @ElonMusk and @Chamath, took down the establishment short sellers at GameStop.

A thread on the underlying mechanics of the $GME saga...

1/ First, for those unfamiliar with the business, GameStop is a videogame and merchandise retailer.

It has >5,000 stores, primarily in malls, across North America, Europe, and Australia.

The business has struggled to modernize, hurting its financial and stock performance.

2/ For a variety of business reasons, a bull (i.e. optimistic) case regarding its future performance has formed.

It really came to the forefront after RC Ventures, an entity managed by Chewy founder @ryancohen, disclosed a large position and assumed three board seats.

3/ @ryancohen summarized his case, stating:

"We are excited to bring our customer-obsessed mindset and technology experience to GameStop and its strategic assets...expanding the ways in which it delights customers and by becoming the ultimate destination for gamers."

4/ At the time of that statement on January 11, $GME stock was trading at about ~$20 per share.

Since then, the stock has surged to ~$200 per share and captured the public imagination.

But how did it happen?

There are two dynamics at play: a short squeeze and a gamma squeeze.

Dollar Cost Averaging 101

Many of the brightest minds in the investing world share one common trait: they recommend dollar cost averaging as an investment strategy.

But what is dollar cost averaging and how does it work?

Here's Dollar Cost Averaging 101!

👇👇👇

1/ Dollar cost averaging, or "DCA" for short, is a simple investment strategy in which an investor splits the total amount to be invested in a given asset across regular periodic purchases.

The regular purchases occur regardless of price, volatility, or economic conditions.

2/ The goal is to remove the complexities of market timing from the process, allowing an investor to build their desired position without concern for external factors.

Its simplicity removes behavioral and psychological biases from the equation.

Let's look at an example.

3/ Imagine you want to build a $10,000 position in bitcoin. You have done your research and believe in the long-term story.

You aren't sure if it will go up or down in the near-term, so you decide to dollar-cost average.

Great decision! How will you do it?

4/ You split the $10,000 up into 20 pieces ($500 each). You could have done any number of pieces, but 20 felt right.

You decide on a weekly DCA, so every Monday, you buy $500 of $BTC, regardless of price. After 20 weeks, you have built your desired $10,000 cost basis position.

First principles thinking is a powerful framework for deconstructing complex problems and driving non-linear outcomes.

Here's a breakdown of what it is and how it works:

Aristotle defined a first principle as "the first basis from which a thing is known."

A first principle is a basic, foundational assumption—one that cannot be deduced or broken down any further.

First principles are foundational truths.

"First principles thinking”—or "reasoning from first principles”—is a problem-solving and innovation framework that requires you to break down a complex problem into its most foundational elements.

The aim: to ground yourself in the foundational truths and build up from there.

When we encounter challenging problems, our tendency is to rely on base level assumptions we have been told are true—or we believe to be true.

It's quick and easy to do.

But it also leads to unimaginative, linear solutions that closely resemble what has been done before.

This is called "reasoning by analogy”—it leads to solutions that are much like something else.

To be sure, it can be very useful when speed is the priority.

But it falls short when dealing with complex problems requiring creative, imaginative solutions.

22 ideas from 2022.

The top 1% of ideas I encountered:

The Feynman Technique

Four steps to learn anything:

(1) Identify a topic
(2) Try to explain it to a child
(3) Study to fill in gaps
(4) Organize, convey, and review

True genius is the ability to simplify, not complicate.

Simple is beautiful.

Visualizing Time

1. Family time is limited—cherish it.

2. Friend time is limited—prioritize real ones.

3. Partner time is significant—never settle.

4. Children time is precious—be present.

5. Coworker time is significant—find energy.

6. Alone time is highest—love yourself.

Darkest Hour Friends

Most of your friends aren’t really your friends. They‘re just along for the ride when it’s fun or valuable.

The real ones are there for you when it’s neither—there for you in your darkest hour.

Treasure your Darkest Hour Friends.

Be one to someone else.

The Two-Day Rule

How to make new habits stick:

With whatever habit you're trying to build, never allow yourself to skip more than one day in a row.

Creates forward progress—but allows for the vagaries of life to enter without derailing momentum.