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How to increase your luck surface area (2010)

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Re: How to increase your luck surface area (2010)

#131

Post by Judgmentality »

TeMPOraL wrote: post #130
Judgmentality wrote: post #97

Earlier quoted context omitted.

> Billionaires can remain solvent longer than you can remain irrational. Melvin Capital has a very real chance of going insolvent. Also have you heard of Lehman Brothers? Hell, just watching Cramer get upset is enough for me to realize the rich aren't happy with what's happening. It seems pretty obvious they're worried. Why else would they pay for ads claiming to have closed a position for which they supposedly no lo…

> Hell, just watching Cramer get upset is enough for me to realize the rich aren't happy with what's happening. The "rich" are a large group. Much larger than the few names that have been on the news recently. There have been plenty of believable reports about funds that already made crapton of money on this attempted squeeze. Now, that everyone's eyes are on $GME, many more will make fortunes riding the stock down.…

And many people are happy making fortunes riding GME up. Why does nobody ever talk about those stories?

If the rich get richer playing the same game as everyone else - good for them! The point is we're playing the same game.

Re: How to increase your luck surface area (2010)

#132

Post by WalterBright »

motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

I'm happy that the GME spectacle happened. It's made a lot of people realize they can participate in the stock market and accumulate wealth. There's no going back!

Re: How to increase your luck surface area (2010)

#133

Post by devlopr »

throwaway2245 wrote: post #129
stouset wrote: post #126

Earlier quoted context omitted.

Absolutely. 4% inflation-adjusted returns aren’t going to turn a single contribution of $1,000 into $1,000,000 in anyone’s lifetime. We have a massive economic problem where the young and the economically disadvantaged face massive challenges achieving financial security. And without the spare funds to contribute non-trivial amounts regularly (and the financial education to buy-and-hold through thick and thin), even…

> the financial education to buy-and-hold through thick and thin I find this somewhat dubious. If you buy-and-hold for a lifetime, you'll face at least a once-in-a-lifetime level of shock at some point. The possibility that this shock will happen just when you need the funds occurs fairly regularly to generations of retirees: but always seems to be forgotten by gold-standard financial advice.

That's why you move from a risky stock portfolio to a safer bold driven portfolio as your age increases.

Re: How to increase your luck surface area (2010)

#134

Post by WalterBright »

stouset wrote: post #54
motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

Your observation about young people with four-figure net worths thinking it’s rational to gamble it all on options is pretty much this week’s equivalent of those living paycheck-to-paycheck “investing” in the lottery. The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compare…

Oh, I figure people will get over wildly speculating in stocks and transition to a more steady hand at it, which will be good for them and the economy.

Kind of like I got over my wild days behind the wheel and drive pretty conservatively today.

Re: How to increase your luck surface area (2010)

#135

Post by stouset »

throwaway2245 wrote: post #129
stouset wrote: post #126

Earlier quoted context omitted.

Absolutely. 4% inflation-adjusted returns aren’t going to turn a single contribution of $1,000 into $1,000,000 in anyone’s lifetime. We have a massive economic problem where the young and the economically disadvantaged face massive challenges achieving financial security. And without the spare funds to contribute non-trivial amounts regularly (and the financial education to buy-and-hold through thick and thin), even…

> the financial education to buy-and-hold through thick and thin I find this somewhat dubious. If you buy-and-hold for a lifetime, you'll face at least a once-in-a-lifetime level of shock at some point. The possibility that this shock will happen just when you need the funds occurs fairly regularly to generations of retirees: but always seems to be forgotten by gold-standard financial advice.

Avoiding that shock is generally (though not completely) resolved by going with a "target retirement"-style fund that shifts your portfolio towards less-risky assets the closer you get to depending on them. Barring this you can also approximate it yourself by weighting further into bonds and fixed-income assets as you age. The FIRE community does something similar with the "bond tent" strategy.

That said, I'm honestly deeply confused as to what you think the alternative is It's impossible to reliably predict crashes or their extent so by selling you're generally just locking in your losses. I personally know multiple people who liquidated during the Great Recession, and... well, not only did they sell at rock bottom prices during the fire sale, but they also failed to get back in to the market during the incredible rally of the last decade.

I know multiple people who got out during the Trump administration, expecting total financial meltdown. Those people are materially worse off than if they'd simply held. I know several who panic sold when the markets took a hit at the beginning of the pandemic. Yet again, they've locked in their losses and missed out on the positive returns that have occurred since then.

So, barring access to a crystal ball, what exactly do you think is the alternative?

Re: How to increase your luck surface area (2010)

#136

Post by WalterBright »

stouset wrote: post #126
rubicon33 wrote: post #120

Earlier quoted context omitted.

> The real Robin Hood-esque company in this whole thing is Vanguard, who have almost certainly done more than most any other company in this space to return profits from the market to customers of all wealth ranges. This is true but unfortunately it's one of those situations where you need money to make money and even then it's a slow multi-decade long process. Culturally young people find themselves in something of…

Absolutely. 4% inflation-adjusted returns aren’t going to turn a single contribution of $1,000 into $1,000,000 in anyone’s lifetime. We have a massive economic problem where the young and the economically disadvantaged face massive challenges achieving financial security. And without the spare funds to contribute non-trivial amounts regularly (and the financial education to buy-and-hold through thick and thin), even…

> the financial education to buy-and-hold through thick and thin

Buy the S&P500 through an index fund or SPY ETF. Then hold it for decades.

There you go. A two sentence financial education, and you'll do at least as well as the market, which has an upward bias over time.

Re: How to increase your luck surface area (2010)

#137

Post by WalterBright »

tylerhou wrote: post #74
PartiallyTyped wrote: post #66

Earlier quoted context omitted.

Being a 4 digit net worth grad student in Europe, riding a few meme stocks just for a short-while has increased my 'wealth' and given me tremendous amount of financial freedom. I understand that the odds are against me, but really, the expectation even when accounting for variance, and adjusting for risk tolerance are a no brainer to me. I made >40% of my net worth in the first 2 weeks of January alone, and with GME…

In the short term, when someone gains in the stock market, someone else loses. Because of “invisible” transaction fees that go to Wall Street, retail is losing on net. So in the bigger picture, small investors aren’t winning, despite our insistence that we are. Some of us are winning. Most of us are losing. And the net result is that Wall Street is getting richer. That’s not good.

> Most of us are losing

If you buy and hold, hold, hold, the transaction fees become inconsequential. I've owned some stocks for 40 years. I've ridden some down to zero (Enron, cough cough).

Re: How to increase your luck surface area (2010)

#138

Post by stouset »

rubicon33 wrote: post #121
darkerside wrote: post #103

Earlier quoted context omitted.

The trouble is that, if it works, why wouldn't you try it again? You're not only a single data point, you are also a snapshot in time. Two months ago, you didn't have much. And, unless you truly decide to stop doing what you're doing, you are likely to have about the same two months from now.

This is exactly right. Posts just like OPs can be found all over the internet, yet it doesn't change the simple facts. Rarely, if ever, do these people come back months later to report that indeed they kept trading and lost all of their gains (if not more). What you have in OP is a snapshot in their time; hardly the complete story. Time will tell, as they say.

I said this in another related discussion, but I hear countless stories from friends about their incredibly prescient trades that net 50% returns in a day. I never hear stories about the losses.

Somehow, despite funding this hobby with their outsized tech worker salaries, none of them seems to have made their millions yet.

Re: How to increase your luck surface area (2010)

#139

Post by stouset »

Judgmentality wrote: post #127
stouset wrote: post #124

Earlier quoted context omitted.

> Melvin Capital has a very real chance of going insolvent I just don’t know how many more times I’m going to have to say that Melvin is going to lose everything. Melvin and WSB are not the only two players in the market. > Also you're completely missing the point. Do you not even understand most of these people aren't trying to make money? If you don't understand that, then you don't even have a basis to start the c…

> I just don’t know how many more times I’m going to have to say that Melvin is going to lose everything. Well, it just contradicts your previous point: > Billionaires can remain solvent longer than you can remain irrational. Anyway, we're obvious not agreeing. That's fine. I wish you luck as well!

n(billionaires) > 1.

Re: How to increase your luck surface area (2010)

#140

Post by hansvm »

stouset wrote: post #54
motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

Your observation about young people with four-figure net worths thinking it’s rational to gamble it all on options is pretty much this week’s equivalent of those living paycheck-to-paycheck “investing” in the lottery. The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compare…

> The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compared to just investing in the market as a whole—over the long run. It’s just another way that the poor are trapped in poverty, even though you can of course always find individual cases where someone got lucky and made millions.

Even with negative expected value, playing a lottery could be a rational decision given the right motivations and circumstances. Suppose for some reason you expect to be living paycheck to paycheck your entire life, barely having any surplus, and that there's nothing meaningful you can do to alter that trajectory. Investing scraps every month at 10% average returns (especially if you don't start till you're 30+) might allow you to retire a month or two sooner, buy slightly newer clothes, or maybe eat out a few more times each year, but even if you just lit that cash on fire you wouldn't have a substantially different life. However a few chances at $250k+ could fundamentally alter your possibilities, giving you a freedom that you otherwise couldn't dream of.

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