The neighbor who got rich being wrong

Moments after the property market had gone vertical. A man sitting at the end of the table explains, without being asked, how he bought four off-plan units in 2020 with money that was not his, flipped three before handover, and now owns the fourth outright. He reads out the arithmetic. At this point nobody is listening anymore.

Everyone drives home and starts re-thinking their own life choices.

Luca Dellanna has a line: never envy someone with a strategy that produces a worse distribution of outcomes than yours, even if, for them, it did produce a better outcome.

You may need to read it twice to understand it completely. You do not envy the astuteness of the over levered trade. Our envy is aimed at his luck and outcome. You are looking at one ball pulled from an urn and inferring the contents of the urn from it, which is the single most common error.

He did not have an edge. He had leverage into a rising tide, and the tide was slow to turn, and it is easy to confuse the two. Most of the finance industry is staffed by people who cannot make this distinction and are paid handsomely not to try.

The hard part isn't in avoiding his strategy. You can run probabilities and easily decline a bad bet on paper. The hard part is watching him win, year after year, when your rational brain told you to sit this out, and remain bored. Envy does not arrive as envy. It arrives as a reasonable-sounding argument for loosening your rules.

Messi is barely running

Watch him in the opening twenty minutes. He walks. The tracking data shows eight kilometres covered where his teammates clock eleven, perhaps, somewhere a performance analyst is quietly noting it as a concern. Then the ball moves three times and he is standing in the only square meter on the pitch that matters.

Ritavan, who wrote a book on why moats fail, made the point that speed and agility are what you optimize for when you don't understand the game. Steps clocked, meetings held. Rookie metrics.

What actually compounds is a causal model. He used the example of the ASML's lithography from machines that make the world's semiconductors: the product is not the machine. The machine arrives and does nothing if you don't know what you must know. The product is the accumulated understanding of how this particular machine behaves in this particular fab, on this particular design, under this particular set of environmental conditions on a humid Tuesday. That knowledge sits inside few hundred heads but doesn't appear anywhere on the the balance sheet.

Organizations are full of small artefacts of causal models nobody bothered to write down. The strange approval step. The reconciliation that seems redundant. The rule that one department follows and cannot explain. I learned this the expensive way at a month-end close, rolling last month's accruals forward because I was tired, and later wrote about why that odd process exists once I understood what the fence had been holding back.

The consultant will only see the waste. However, the operator will see a scar tissue. One of them has a model of the system and the other has a slide.

Sixty-one years per blog post

Rick Rubin asked Tyler Cowen how long it takes him to write a post on the blog he has published every single day for twenty years. Cowen answered: sixty-one years. Then, because he is precise, he added that in the moment it takes almost no time at all, and that it is the fixed cost that matters.

The economics of that answer: The marginal cost of his writing is close to zero, because the reading and the conversations were going to happen regardless. He is not manufacturing content. He is decanting something that already exists, and the vessel has been filling since he was a child.

When you start writing, you usually get this backwards and that's why we struggle. You see writers who write quickly and try to copy the speed. You see the investor who decides in ten minutes and copy the decisiveness, not the thirty years of pattern recognition that made ten minutes sufficient. Cal Newport's argument in So Good They Can't Ignore You is the same shape: the passion does not precede the skill, it follows it, and if you are waiting to feel certain before you begin, accumulating certainty will require you to wait forever.

But Cowen said something else that I think is the real point. He does it to force himself to learn. You only understand economics when you have to teach it. The daily obligation is not for the sake of producing a blog post every day, it is to keep yourself honest. You cannot fake having read the book when you have to say something about it by morning. You cannot fake understanding a business when you have to write down why you own it.

Most thinking is never tested because it is never externalized. It stays warm and vague and self-flattering in the skull, where it can never be wrong. Writing it down is how you find out that the position you have held for six years is three assumptions stacked on a feeling.

The ledger is not for the reader.

My Ledger — notes on investing, books, and things I'm still figuring out. The Library is where I keep the books that shaped how I think. The Journal is where I work through ideas in public.

Mandelbrot — the private toolbox behind the thinking.

Hit reply if something here sparked a thought. I read every response and always write back.