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!

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In 1637, the Dutch Republic erupted into a speculative fever over an unlikely item...the tulip.

Tulip Mania has become a legend synonymous with market euphoria and bubbles. But is this tale all it's cracked up to be?

Who's up for a story?

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1/ The tulip is a spring-blooming flower native to the valleys of the Tien Shan Mountains in Central Asia.

It is believed to have been introduced to Europe in 1554, when an ambassador of the Holy Roman Emperor sent tulip bulbs and seeds to Vienna from the Ottoman Empire.

2/ Tulips gained in popularity as people were attracted to their rich color and ability to grow in sub-optimal conditions.

They soon became a coveted status symbol for the wealthy.

The Semper Augustus, with its colorful, flame-like streaks, was the most desired of them all.

3/ By the early 1600s, the Dutch Republic was entering a golden age.

Many financial innovations popped up during this time - the first stock exchange, for example.

But it was another financial innovation that would propel tulips into historical lore: the futures contract.

4/ As tulips grow slowly and may take several years to bloom, paper contracts were written that entitled the buyer to the future tulips.

These contracts were freely-traded.

So in addition to the physical market for tulip bulbs, a thriving paper market was established.

Incentives are everything.

Here’s a framework for establishing incentives (that actually create desired outcomes):

Great incentives create great outcomes.

But unfortunately, humans are astonishingly bad at establishing incentives—we consistently invite manipulation and unintended consequences.

This thread shares my framework for a establishing better incentives:

Incentives are anything that drives an individual to act in a specific manner.

Intrinsic incentives are internal—created by self-interest or desire.

Extrinsic incentives are external—created by outside factors (reward, punishment).

Today, we'll focus on extrinsic incentives.

In a very simple model, extrinsic incentives typically involve two key components: the measure and the target.

The measure is the metric that the individual or group will be judged upon.

The target is the level of the measure at which a reward (or punishment) will be initiated.

The problem?

This simple model of incentives—which will feel familiar to many—often leads to undesirable outcomes and unintended consequences.

Goodhart's Law explains why:

When a measure becomes a target, it ceases to be a good measure.

5 simple principles to accelerate your career:

Principle: Follow Your Curiosity

Humans are born with astonishing curiosity.

But somewhere along the way, we're told to stop asking questions.

Push back.

Learn to follow your curiosity—trust it.

For the curious mind, anything is possible.

Fortune favors the curious.

Principle: Operate in Your Zone of Genius

Your Zone of Genius is where your interests, passions and skills align.

Operating in your Zone of Genius means playing games you are uniquely well-suited to win.

It means you can stop playing *their* games and start playing *yours*.

Principle: Adopt a Positive Sum Mentality

Want to get ahead in life?

Start genuinely rooting for others to succeed.

When one of us wins, we all win—winning spreads.

If you adopt that mentality, you’ll become a magnet for the highest quality people.

Principle: Speak Up

Closed mouths don’t get fed.

A little push goes a long way.

Don't sit back and wait for good things to happen.

If you want something—and you’ve put in the work for it—ask for it.

Worst case: you’re told no and nothing has changed.

Best case: it’s yours.

A paradox is a seemingly self-contradictory statement that proves true.

The most powerful paradoxes I’ve found:

The Paradox of Failure

You have to fail more to succeed more.

Our greatest moments of growth often stem directly from our greatest moments of failure.

Don’t fear failure.

Learn to fail smart and fast—never fail the same way twice.

Always put yourself in the arena.

The Paradox of Persuasion

Ever notice that the most argumentative people rarely persuade anyone of anything?

Persuasive people don’t argue—they observe, listen, and ask questions.

Argue less, persuade more.

Persuasion is an art that requires a paintbrush, not a sledgehammer.

The Paradox of Productivity

Work longer, get less done.

Parkinson's Law says that work expands to fill the time available for its completion.

When you establish fixed hours to work, you'll find unproductive ways to fill it.

Work like a lion instead—sprint, rest, repeat.

The Paradox of Effort

You have to put in more effort to make something appear effortless.

Effortless, elegant performances are simply the result of a large volume of consistent, effortful practice.

Small things become big things.

Simple is not simple.

The Concept Of Economic Moat While Analysing a Company

Economic Moat 101

A Thread 👇

Inspiration -- @FI_InvestIndia

What is a Moat ?

The dictionary defines the word ‘moat’ as a “deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack “.

In stock market investing, an economic moat is an important concept with none other than Warren Buffet as one of its strongest proponents.

In fact, he has stated this multiple times that he loves companies with huge and long term competitive advantage over others, which he refers to as buying an economic castle with a ‘moat’.

A company with a moat has an edge over others as :

- It will have little or no competition

- it will be in an industry which would be difficult to penetrate into

-It will have a distinct cost advantage

1) Get a cup of coffee.

In this thread, I'm going to walk you through "The Kelly Criterion".

2) In 1956, John Kelly published a paper titled "A New Interpretation of Information Rate" in the Bell System Technical Journal.

3) In the paper, Kelly described a simple and elegant way for investors to strategically allocate capital in the face of uncertainty.

This is what is now known as the Kelly Criterion.

4) The approach is easiest to understand with an example.

I'll keep it as realistic as possible:

Imagine that you walk into an antique store one day. Due to the persistence of the salesman there, you buy an old lamp from him.

5) You take the lamp home. You rub it. Out comes a genie. Nothing unusual.

When a stock is trading around 15-20x sales - ask why would an accident not happen? What could be the valuations damage in that case?

Saturday thoughts on market pull. What is it? How is it different from Total Addressable Market (TAM)? And what ideas tend to have strong market pull?

A thread >>

1) First: "Market pull" != market size.

IMO (and most VCs will disagree!!), market size (TAM) doesn't *really* matter. But market pull DEFINITELY does. For that reason, I've almost never asked a startup about TAM.

Why?

2) First, what is TAM?

TAM is a sizing of how big your market is. A good way to estimate this is - if you can get to all potential buyers and based on how much $$ they are worth to you, how much money can your company make if you took the whole mkt?

3) An example: Say we run an e-commerce site that sells hippo food. TAM in the world:

-1000 zoos have on average 3 hippos = 3000 hippos.
-Each hippo eats $100 worth of food each day
-365 days * $100 * 3000 hippos = $110m per year globally

4) But, we'll come back to this.

Why I don't like TAM - it doesn't take into acct a few things:

A) how hard it is to get customers
B) how much more you can upsell once you have customers
C) how fast the mkt is moving up or down

RIPPLE’S DUE PROCESS CLAIM:
In @Ripple’s Answer it asserted a defense that the SEC should be barred from claiming #XRP is a security today because it violates Due Process and principles of Fair Notice. Previously, I discussed a similar concept called the doctrine of equitable

estoppel. I explained the law protects a party from being harmed by another party's voluntary conduct. That conduct may be ACTIONS, INACTION, SILENCE, or ACQUIESCENCE. Although the SEC never declared XRP a non-security, for EIGHT YEARS it openly traded in unison with #ETH and

#BTC. During this time, some from the SEC, including Clayton, commented that #BTC and/or #ETH were not securities. For 8 years the SEC’s actions, inaction, silence and acquiescence implied that XRP was also NOT a security. Let’s review a few of the SEC’s actions, inaction,

silence and/or acquiescence related to #XRP. (1) During the period of time the SEC claims XRP was a security, the SEC granted Ripple permission to take a minority stake in MoneyGram (MGI). Ripple invested $50 million purchasing approximately 9% of MGI. The SEC approved this

purchase of MGI with the full knowledge that Ripple would encourage MGI to use XRP as a cross-border utility token related to remittances. The SEC allowed the use of this so-called illegal security to be utilized not just by Ripple, but by MGI. The SEC admitted to this knowledge