I often get a lot of questions from friends about what I am up to. I tried something out this year where I put together a Year in Review Update to send out to some friends. One of them suggested that I go ahead and share it publicly to let people know what is going on with me and maybe generate a bit of luck.
To that end, I wanted to put together a note sharing a bit about what is going on with me, with hope of including some lessons learned that might be helpful to you. If you have any thoughts, please let me know!
Every year I go through the exact process I teach in my review and planning masterclass and come up with this stuff. I found the process of converting that into this update was both easy and fun and a good way for me to process.
This update is somewhat long. No one has ever accused me of being overly brief! I’ve added headings with tl;drs if you would like to skim!
All appropriate disclaimers apply: I am not a doctor, lawyer, accountant, financial advisor. I don’t even play them on the internet.
Tl;dr: I’ve been working on a new ‘black swan’ style investment strategy with some great partners, my second book is 80% of the way done, working with smart and kind people is very rewarding and you should do it more, buying cheap is a margin of safety, and optimizing too much for optionality reduces your potential leverage and impact.
Mutiny Investment Strategy.
Nassim Taleb’s work has been a big intellectual influence on me. In part, it was my introduction to the notion of complexity which transcends almost everything I’ve ever worked on from OODA to applying complexity to marketing to the frameworks I’ve used in both my books.
However, I had never really figured out how to apply it to investing.
In 2016, I began reaching out with and talking with hedge fund managers specializing in high volatility and black swan scenarios. These types of funds are often categorized as tail risk, meaning they do well in bad years for traditional markets such as the S&P Index.
I burrowed down the rabbit hole from there, reading a range of books and research papers, and starting to dabble in trading options, a common tail risk strategy, to understand how they worked.
Through that process I met Jason Buck, a trader with over 20 years of cross asset class trading experience. Similar to me, 2008 had been a light bulb moment for him. He had spent the last decade consulting with family offices and high net worth individuals to make their portfolios more antifragile. He had found some answers.
We spent hours on the phone talking about his research every week for months.
What became clear through those meetings and subsequent conversations was that there were some pretty good answers to the questions I had been asking. There were people who had figured out viable approaches to tail risk hedging against black swan events, attempting to find a way that investors could add an effective form of diversification to their portfolios.
And so, we set out to see if we could actually build such an investment strategy. We’ve spent over a year doing due diligence on dozens of potential managers and strategies, building upon the thousands of hours Jason had spent in the preceding decade as well. We partnered with RCM Alternatives, an award winning twenty year old firm managing billions of dollars, piggy backing on their ongoing due diligence of these managers, extensive database of hedge funds, and expertise in analytics and measuring risk and reward profiles.
Out of this was born the Mutiny Investment strategy has been designed to act as a so called ‘black swan’ investment. It is a form of ‘antifragility’ or ‘crisis alpha’ that is intended to achieve large asymmetric gains in times of high volatility or tail risk such as the 1987 flash crash, 1998-2001 dot com rise and crash, or the 2008 financial crisis.
When combined with short volatility assets such as stocks, bonds, real estate, VC/angel or private equity, Mutiny aims to provide an effective form of diversification, allowing investors to achieve superior portfolio performance while reducing drawdowns over the course of a market cycle.
I’m really proud of the work we’ve done developing this strategy to date and excited about continuing to develop it. Over the coming months, I’ll be publishing more of our research behind the Mutiny strategy.
If you’re interested in learning more, drop us a line in the contact form at the bottom of this page or you can sign up to our newsletter to stay up to date.
Markets are Eating the World
I’ve been working on a new book which started as an answer to the question “how is Bitcoin/blockchain going to affect my life and what should I do to prepare?” I spent most of 2018 researching and working out what I was trying to say and published an article with the thesis I had come to in February of 2019. It was one of the most popular things I ever published and so I figured I was onto something and got to work putting it into good enough shape to become a book.
At the end of 2019, I worked with a developmental and line editor to finalize the structure. I am getting ready to send out the book out for feedback to some early readers (you can register here if you’re interested) with the aim of getting it back in a few months and finish writing it with their feedback incorporated by the end of the year.
As I mentioned above, if there is one thread that ties all my work together, it’s an interest in complex systems and how to make them work better. Bitcoin, the Mutiny Investment Strategy, and my consulting work with business owners are all different ways of working on that core problem. This book and my interest in bitcoin has very much been an expansion on that.
I have been doing consulting and business coaching work for over five years now but something about it kind of flourished for me in 2019.
Partially, I think I finally embraced that I prefered the face-to-face and one-to-one interaction of working with clients.
I find it both more rewarding to be able to help someone one and one and the caliber of people I work with is very high and so I frequently learn as much (or more) from them as I they learn from me.
I had sort of resisted this conclusion because I felt like doing more courses and building out the information product side of the business was the “right” thing to do. It was more scalable, offered better revenue, and would better leverage the 30k+ email list I had built.
However, one of my big realizations about myself around 2016/2017 was that it was very important to me to work with smart people whom I respected on a daily basis. The fund, book and consulting work all have carried me more in that direction and I feel very grateful for the caliber of clients I’m working with today and the trust they put in me.
So while I may return to the information products side of the business at some point, I am very happy to be working 1-on-1 with such a great group.
I also invested more in some standardization and intellectual property on the consulting front that I think paid dividends. This includes codifying my overall consulting framework and building a more sophisticated diagnostic tool as a way to assess current state and weak points of a business.
I bought a small SaaS app at the end of 2018. I’ve been very interested in the “micro private equity” spack for the last four or five years and wanted to dip my toes in the water.
We reinvested in building out the app and improving the marketing last year and are excited to see it continue to grow.
My big lessons one year since the acquisition are:
- Small is good and bad. iChrome is a very small SaaS app with one part-time marketing person, developer, and customer service. I wanted to start with a smaller acquisition as the cost of messing it up would be manageable and it would give me more confidence to buy something bigger. I would say that thesis has worked out. However, it’s also certainly true that an app 10x the size of iChrome would not required 10x the effort and so feeling more confident about the process of acquiring and managing a small business, would like to move up the chain if/when I do another acquisition.
- Platform risk is real, but at least somewhat manageable – The major risk and concern I had about the business was platform risk. It’s a Chrome app and relies on the Chrome webstore for most of its customer traffic. We were “delisted” once in 2019 in what appears to have been an automated review. Though the app was quickly reinstated and there weren’t any long term effects, it was a reinforcement about how significant platform risk can be to internet companies and finding ways to diversify against it is important.
- Buying it “cheap” is a margin of safety – Part of my interest in the micro private equity space is that the compared to public markets, the multiples are wildly lower. Where many public companies trade at 20x revenue, typical multiples for small internet businesses are in the 3-4x profit range. That’s a big difference and provides a meaningful margin of safety (though, to be sure, there is much more risk associated with a smaller, less established business).
I mentioned earlier that one of my big realizations about myself in 2016/2017 was that it was very important to me to work with smart people whom I respected on a daily basis and I started taking steps in that direction around that time.
That is true of all the clients I work with now, which is pretty awesome. I also want to say a particular thank you to Gary, my partner on iChrome, and Jason, my partner on Mutiny. They have both been wonderful to work with and I hope to get the chance to keep working with them for many years into the future.
I’ve also really enjoyed working day-to-day with Matt who has been helping out with email marketing, customer acquisition and setting up our processes over the last three years. (He has outgrown me in that time and is taking on some additional clients – hit him up or lmk and I can make an intro if you know someone that could use some marketing help)
I think it has also been part of a broader philosophical shift for me. I wrote a short newsletter in December about optionality vs. leverage. I am not sure this is the perfect way of explaining it, but generally I think it is true that by focusing on optionality, you are giving yourself less leverage – the consultant at McKinsey that is keeping a finger in ten different pots can neve really take off.
I think I have historically focused too much on optionality and so a lot of the career/business decisions that I have made over the past few years have been to “cash in” some of that optionality for leverage.
I think partnerships are one way that happens. Good partnerships create a 2+2=10 but bad partnerships create a 2+2=0 effect, which looks like leverage to me.
Part of this shift for me has just been seeing peers that have focused more on leverage and what they’ve been able to achieve.
Frankly, another big part has been a result of my relationship with my wife who has helped me to see the power of truly partnering with someone.
Once or twice a year, I go through a calendar audit exercise that I do with clients and categorize all the things I’ve worked on into buckets of how valuable I consider them.
They all have four big buckets which I just combine into one framework
|$10,000/hr||Unique||High Impact/Low Effort|
|$1,000/hr||Good||High Impact/High Effort|
|$100/hr||Competent||Low Impact/Low Effort|
|$10/hr||Incompetent||Low Impact/High Effort|
Each category doesn’t map perfectly, but they generally line up pretty well:
Here were the things I spent my time on in 2019 and how I would categorize them.
$10k/Hour Work (Unique Work or High Impact/Low Effort)
- Going to the Gym/Exercising
- Spending quality time with my wife
- Hiring and working with a coach/trainer
- Keeping a Food Journal
- Quarterly Planning
- Weekly Planning
- High quality networking in small groups (no big conferences or if so, side parties at them)
- Updating consulting process and sales materials to close more and deliver better service
- Sales calls with qualified prospects
- Updating branding/messaging
- Posting quality content on Twitter and engaging in discussions where I learn
- Mobility/Myofascial release work
- Writing things I get emotional about (excited/angry)
- Reaching out to experts to help me instead of banging my head against a wall
- Cold emailing high value contacts to meet up with when I am in their city.
- Hosting Dinners
- Spending time with parents/siblings/in-laws
$1k/Hour Work (Good or High Impact/High Effort)
- Putting together and sending out my Weekly Newsletter
- Writing things with clear business value
- Working with good clients from whom I can learn
- Board calls for iChrome
- Attending quality conferences
- Replying to people and engaging in conversations on Twitter
- Going to Doctor’s appointments instead of ignoring things
$100/Hour Work (Competent or Low Impact/Low Effort)
- Working with clients that have little to teach me or are difficult
- Publishing mediocre posts just to get something out
- Scrolling through Twitter/Social Media notifications w/o being proactive (i.e. don’t use it on phone)
$10/Hour Work (Incompetent Low Impact/High Effort)
- Booking travel logistics
- Dealing with unreliable contractors
- Scheduling appointments
- Tax optimization podcast – I forwarded this around to a few people, but this is the best thing I’ve ever found on the options for tax optimization.
Tl;dr: Hiring a trainer/nutritionist for accountability helps a lot, back pain sucks
Eating Better and Accountability
From the time I was about 8 until I was 21, I was overweight. The heaviest I remember weighing in at was 345lbs my senior year in high school, though I was 315 or heavier probably from my junior year of high school through junior year of college.
By my senior year of college, I had bad back pain and was on medication that had side effects on my kidneys and still had to go back to my dorm room to lay down for an hour or so every afternoon.
That was the kick where I decided that this had to change or life wasn’t going to change. Around that time I stumbled into all the paleo stuff, Robb Wolf and Mark Sisson’s blogs in particular, read everything and started eating Paleo-ish and exercising almost every day. I lost about 120lbs over my senior year and the year after college when I was teaching English in Brazil.
I was pretty good about maintaining the progress and started lifting weights until around 2016 when I found that other things in life (mostly work projects) started to take priority and I wasn’t as diligent as I had been.
To some extent, I was choosing to prioritize those other things deliberately. I could work out every day for two hours but I realized that I didn’t want to spend that much time on it.
However, eating well and going to the gym 3-ish times per week is plenty to stay in good enough shape and the time commitment for that is pretty minimal, I just found myself frequently making excuses about being busy or stressed as not going to the gym or eating crap to cope.
At the beginning of 2019, I hired a trainer. It was nothing magical, but the added accountability got me back in the gym consistently and markedly improved my diet where I felt like I had turned around the “slide” that had been going on for the past few years.
The back pain I had when I was in college disappeared entirely after I lost weight, but came back last year for the first time. One of the first things that was helpful in dealing with it was starting a “back pain journal” which was suggested by Critical Mas (He has some other helpful resources).
Mine mostly seems to be set off by some types of heavy lifting (mostly squatting) and long periods of walking or standing, though sometimes it seems to flare up for no clear reason (maybe stress?)
I think the pain from squatting may be sort of imbalance. I do tend to favor my right leg (it’s stronger) which I know is not good so I’ve dropped the weight a lot and am trying to focus more on form.
I suspect it is also in some way a remnant of football injuries and being overweight for a long time. However, some things I have done that seem to help:
- Gold Medal Bodies Elements Course – This is an 8-week course that’s intended as an introduction to gymnastics. It was recommended to me by my trainer at MyBodyTutor because it emphasizes mobility (dynamic movement) over just flexibility (static movement which I believe is more where Yoga falls). It takes maybe 30-45 mins on training days and 15-20 on rest days and you are doing stuff like bear crawls and jumping around in squats. It seems to have made some meaningful difference. I started around September of last year and since then the back pain has gotten markedly better (though I was doing a few other things in conjunction, see below)
- Myofascial Release – A friend that plays Tennis and had knee pain started going to a massage therapist that does myofascial release and said it markedly improved his pain. I also had another friend that had some chronic pain try it and they found it helped as well. I found someone in Austin and went a few times last year. This is basically the least pleasant massage experience imaginable. They find areas where the fascia (something that is between your skin and muscles as I understand it) has gotten “stuck” and then they use their thumbs or the palms of their hands to massage it and it feels horrible. However, it also seems to help as I noticed significantly less back pain days after I went. I have been using a hard foam roller at home as well a few days per week (during conference calls is great for this…)
The other thing I am trying to work on this year is standing at my desk more. Since the pain often starts during longer periods (2+ hours) of standing or walking, I wonder if perhaps my back muscles just lack endurance/strength because I spend so much of the day sitting.
- I bought an oura ring earlier this year and found it really helped my sleep. I think the main effect was just a result of “what gets measured gets managed.”
Tl;dr Getting married was awesome, establishing traditions and rituals to maintain and build friendships is a lot of work but worth it.
I got married! That is certainly the biggest piece of news in general from last year for me. Suffice to say I really like her and feel very lucky to be her husband which seems to be a good way to feel about the whole thing.
There was an article in the New York Times in 2012 entitled Why Is It Hard to Make Friends Over 30?.
The part that stuck with me was this “As external conditions change, it becomes tougher to meet the three conditions that sociologists since the 1950s have considered crucial to making close friends: proximity; repeated, unplanned interactions; and a setting that encourages people to let their guard down and confide in each other”
Based on anecdotal experience from my own life, that rang true. Most of my good friends were people that satisfied those criteria – high school and college naturally foster those, living in as an expat in Asia for a few years fostered that as expats tended to live in one area and hang out frequently.
Like most people today, there isn’t a ton of built in structure in my life that facilitates it and so I’ve been trying to find ways to do it. A few things that I started doing that I found really rewarding:
- Annual backpacking trip with college friends – I have a small group of friends from college that I used to go backpacking with. One of them started organizing an annual backpacking trip a few years ago which has become one of my favorite things of the year. Something about being in the outdoors and offline expands time in a way that is hard to describe.
- Annual Retreat – About four years ago I started hosting a little lake house trip for friends from around the world which has consistently been one of the most rewarding things I do. I find these smaller (5-15 people) weekend trips are way more enjoyable and beneficial than larger conferences. My biggest tip for doing these is to hire a good caterer that can oversee all the food and just let everyone hang out.
- Book Club – I was in 3 book clubs in NYC and found them all great, both from a reading perspective and from a social one. They are repeated interactions in close proximity and I found they helped me really get to know the people that were a part of them. I’ve kept up with one of them in NYC and started hosting another in Austin.
- Golf – My parents sold their house last year which meant I finally had to go clean up all the stuff I had left there forever ago. The moving truck that moved us from NYC to Austin stopped by their house in Memphis and picked up the things I wanted to keep which included a set of golf clubs, mostly because I didn’t know what to do with them. However, I have now started playing maybe once a month and going to the driving range a few other times per month. I’m not very good, but just being outside with other people I find super enjoyable and relaxing and it has helped me get to know them better.
Moving to Austin has been good for this in some ways as well. Austin is a pretty small city and most people live downtown or within a 15-minute drive which makes it much easier to get together and everyone in Austin has been very welcoming and gracious. I’m excited to be here and plan to stay for a long time.
In general, these sorts of relationship building things are the “highest ROI” things I do in the sense that looking back they are the things I am most grateful for having done, though they are very much important/non-urgent and so easy to procrastinate.
What would an update be without a list of books!
One quick note on reading in general: I started using Kindle Whispersync last year where you buy the audio and Kindle book and you can switch between them. This has made audiobooks way better as I will listen when I’m doing chores or walking, but can stop and highlight or take notes to use later which I find helps me engage better with the book and learn more.
Here were my five star reads from last year:
Virtually all human societies were once organized tribally, yet over time most developed new political institutions. Some went on to create governments that were accountable to their constituents, others created more autocratic regimes, and some never developed beyond tribalism.
Drawing on a vast body of knowledge—history, evolutionary biology, archaeology, and economics—Francis Fukuyama sets out to explain why and tells the story of the origins of democratic societies while raising important questions about the nature of politics.
I think I have historically undervalued some of humanity’s “soft” technologies like political systems and institutions, in part because they are very hard to measure or study in an objective way. In the spirit of the big history genre, Fukuyama does his very best to martial empirical evidence to address one of the largest questions of human history and development. In my opinion, he was quite successful.
From his analysis of the role of the Catholic Church in establishing rule of law and property rights in Europe to the why the Han dynasty in China developed political institutions that would not show up in Europe for a millennium later, I found this book fascinating.
The Dark Forest
This is the second novel in “Remembrance of Earth’s Past”, the near-future trilogy written by China’s multiple-award-winning science fiction author, Cixin Liu.
The set up is that Earth is reeling because of a coming alien invasion that they know will reach the planet four centuries in the future. The aliens have sent sophons, a type of subatomic particles that blocks any more research in fundamental physics and allows them instant access to all human information, meaning that Earth’s defense plans are exposed to the enemy. Only the human mind remains a secret.
This is the motivation for the Wallfacer Project, which grants four men enormous resources to design secret strategies that no one else knows about. The book follows the stories of these four wall facers over the course of multiple centuries in their quest to save humanity. I’m normally not a huge hard sci-fi guy, but the science here is absolutely fascinating and so well presented that I loved it. Most notably, it is one of the best books on game theory and geopolitics I have ever read (in the spirit of Dune). If you want to start from the beginning, the first book is The Three Body Problem.
The Dream Machine
M. Mitchell Waldrop
The Dream Machine is a superbly researched and written history of computers and the internet. The book follows MIT psychologist J. C. R. Licklider, whose visionary dream of a human-computer symbiosis transformed the course of modern science and led to the development of the personal computer. Along the way, Waldrop profiles the work of every major computer science pioneer from Norbert Weiner (cybernetics) to Alan Turing (The Turing Test) to Doug Engelbart (inventor of the mouse).
To give just a couple of examples of how this book changed my thinking, seeing how researchers in the 1950’s thought about AI (they thought it was just around the corner!) certainly changed how I view AI today. Seeing how the funding for early computer research was backed by the government and how that has changed shaped my view of the role of governments in fundamental research. The story of Xerox PARC changed how I thought about innovation and organizations. In 1973, XEROX had a working demo of what the typical office would look like in 2000 – personal computers with graphical user interfaces, mouses, and keyboard connected by ethernet. It was almost a decade before anyone else caught up but XEROX executives completely ignored the technology.
Most fundamentally, the book shows how computer pioneers all shared a vision of computers as an extension of human potential. Though it seems blasé now, the invention of the word processor didn’t just make it easier to type up memos, it allowed people to think in real time. When I am writing, I will frequently cross out and edit a sentence a dozen times in one draft because I can easily change it to see how it fits – a possibility that didn’t exist with the typewriter. For anyone that works with computers (which is everyone!), this was wonderfully enlightening.
The Timeless Way of Building
Christopher Alexander was a professor of architecture at Berkley and published The Timeless Way in the 1970s. Ostensibly, this is a book about architecture and urban planning and it is a terrific book to that end. But more than that, it is a book about complex systems and how the dominant modernist and postmodernist world views we were all raised with fail to understand them. Alexander starts from a very simple premise – how do you build a living space – a room, a building, a neighborhood or town that feels good to live in. Alexander contends that this was an art that historically relied on the intuition and illegible knowledge of residents living in a place. If you’ve ever walked around an old European town, there is a certain feel to it that you definitely don’t get in suburbs built in the last century.
Alexander talks about how we can recreate this feeling of fit and comfort in a place using a pattern language. A pattern language is a set of heuristics or rules of thumb about what works in a particular, local corner of a complex system. In the example of architecture, one pattern is South Facing Outdoors. People use open space if it is sunny and do not use it if isn’t. If you are in the Northern hemisphere, the area in front of a building on the north side of a lot will get much more use and people will get to enjoy being outside more than if the building was on the South side. Another pattern is farmhouse kitchen – basically, a kitchen which is openly connected to the main living space in the home. The isolated kitchen separated from the family is considered more efficient but forces whoever is to be alone because it’s unpleasant for others to sit in the kitchen. These sorts of details are not easily legible or measurable – when you are buying a home or looking at apartments, you see easily advertised characteristics like square footage, amenities, and location, yet none of these things make a place feel comfortable to live in.
So too with many of our modern systems. In the name of legibility and measurement, we ignore the local knowledge which is hard to articulate and measure. Why does it feel better to live in a home with a farmhouse kitchen where everyone can be together? I don’t know, it just does. So too with many other areas of the modern world, we need to remember and redevelop a pattern language which makes it less legible and more human. This was a beautiful, beautiful book (as was the sequel I read a couple of years ago, aptly titled A Pattern Language)
Last Updated on August 19, 2020 by Taylor Pearson