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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)

#141

Post by [deleted] »

im3w1l wrote: post #86
stouset wrote: post #54

Earlier quoted context omitted.

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…

So something I've been thinking about: Living people enter the market when they make money, and they do that in a correlated way (times of high employment). And they exit the market in a correlated way to spend on retirement or college or whatever. Entering and exiting when everyone else do means you get a bad price.

[deleted]

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

#142

Post by bdavis__ »

stouset wrote: post #135
throwaway2245 wrote: post #129

Earlier quoted context omitted.

> 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 honestl…

i was one of those that was just certain trump was going to tank the economy. my thinking was "he has no clue, and his bumbling around will ruin it". very wrong, and missed out on a lot of gains. and not too sure of when to start dollar cost averaging back in.

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

#143

Post by stouset »

WalterBright wrote: post #136
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 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.

Of course! A very large proportion of my net worth is VTSAX. Target retirement funds are potentially an even better option for the average retail investor.

But the educational part comes with teaching people why this approach tends to have better outcomes than others and also to help instill the understanding of how panic-selling during a downturn is a losing strategy of "buy high, sell low".

I didn't have significant assets during the 2008 crash, but I certainly did last March. And even though I've advised others to buy and hold for years, it took a lot of self-discipline and self-reassurance to not throw that all away and exit the market when it became clear what the extent of the pandemic was likely to be.

Even today I don't think I fully understand why the market has done as well as it has. But I do know I'm glad that in the end I was able to stick with the game plan I've been preaching all this time.

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

#144

Post by Judgmentality »

stouset wrote: post #139
Judgmentality wrote: post #127

Earlier quoted context omitted.

> 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.

Okay. So when you say:

> Billionaires can remain solvent longer than you can remain irrational.

It just sounds really disingenuous when we're talking about Melvin Capital and you agree they're going to lose all their money.

Nobody is claiming all billionaires are going away because of this trade. The point is some billionaires will lose money on this trade.

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

#145

Post by christiansakai »

kharak wrote: post #11

Being passionate about something for a long time (not just a couple of hours or weeks) seems to be a rare quality. Too bad for those who lack it, as it seems to be a requirement for success in everything. There are so many posts that try to tell you how to get the most out of your passion, I haven't seen one that explains the origin of passion or whether it is possible to become passionate.

Jack of all trades here. I'm fine not being rich because of doing jack of all trades.

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

#146

Post by dkubb »

bdavis__ wrote: post #142
stouset wrote: post #135

Earlier quoted context omitted.

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 honestl…

i was one of those that was just certain trump was going to tank the economy. my thinking was "he has no clue, and his bumbling around will ruin it". very wrong, and missed out on a lot of gains. and not too sure of when to start dollar cost averaging back in.

The only correct answer to this is now. Right now. No one knows if this is the top of the market and tomorrow everything will come crashing down, or if this is the very bottom of a 10 year bull market. On average you do better not trying to time the market and just contribute on an automated schedule. Set up monthly contributions and buy regardless of whatever is happening in the market and then try to forget about it for most of the year.

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

#147

Post by renjimen »

m463 wrote: post #23
kharak wrote: post #11

Being passionate about something for a long time (not just a couple of hours or weeks) seems to be a rare quality. Too bad for those who lack it, as it seems to be a requirement for success in everything. There are so many posts that try to tell you how to get the most out of your passion, I haven't seen one that explains the origin of passion or whether it is possible to become passionate.

"stop starting and start finishing" On the other hand, we have so little time here. Who's to say whether narrow and deep is always more rewarding than broad and shallow? You know, be mindful of doing the wrong thing well instead of the right thing poorly. So learn to forgive ourselves for pursuing things that fizzle out or lose our interest. Leave space to preserve passion to the benefit of our health and happiness.…

Exactly! Few people espouse the downsides of being very passionate about something. It can often lead to missed opportunities and a narrow view of life. Not to say it can't be balanced, but a lot of very passionate people I've met are difficult to arrange things with or have neglected other parts of their life, such as learning to be organised or social skills.

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

#148

Post by Sophistifunk »

fnimick wrote: post #102
dehrmann wrote: post #69

Earlier quoted context omitted.

> the economy doesn't provide anything better to invest in for under $50k What's wrong with index funds? Real estate isn't everything.

I think the underlying assumption, which wasn't spelled out in the parent, is that any amount of money under $super-rich is similar amounts of worthless. If you genuinely believe that, then high-risk swings at a big payday make more logical sense than a low-risk gradual growth strategy. I've heard friends express this - if you don't have $1 million +, you're just varying degrees of poor - so there's no point at gradu…

They're wrong though. I'm not worth much at all, but slowly (and thanks mainly to YNAB) I've managed to build up 5 digits of cash (savings, not folding), rather than living paycheck to paycheck. This is a huge load of daily stress I used to have that I no longer do. My credit card is for convenience and frequent flyer points, not something I might not eat without. I bought the missus a (6-year-old, boring) car recently, and I did so with a personal loan not because I had to but because I chose to keep the money on hand, and the world is a little shaky right now. I didn't have to accept a lien on the car, and if there were a crunch on my cashflow I can make minimum payments for a while.

I don't have "fuck you money", and probably never will, but even this much peace of mind has helped my mental health significantly.

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

#149

Post by brianbrianbrian »

sgpl wrote: post #75
punnerud wrote: post #47

Earlier quoted context omitted.

I love how Reddit (and HN) enable fast sharing, fact checking of information and lifting ideas. When it comes to increase luck surface I think Clubhouse maybe will become one of the most important platforms. GME case seems to exploit the possibility for “short attack” by flipping the table into a infinite price increase, because the hedge funds accidentally created more fake shares that there is shares in existence a…

I'm actually not super bullish on clubhouse. I'm sure they'll find some success but to call it something that will become one of the most important platforms, I don't see it. And perhaps I'll be proven wrong in the next decade on this. I've recently started using twitter again (after initially using it in 2010/2011) and I feel that there's so much self promotion all the time disguised at knowledge sharing. It also se…

Dang I totally feel you on the whole self promotion thing and for me, it happened with Medium.

Used to love reading essays all the time but now all the titles tend towards click bait and every essay seems to begin or end with them pitching their newsletter/podcast/etc. and that ends up coloring my whole impression of what I just read.

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

#150

Post by wolfram74 »

tylerhou wrote: post #83
uyt wrote: post #78

Earlier quoted context omitted.

Expected value (a straightforward sum of total money in the system) is the wrong way to look at it. His point is that the expected utility of these gambles is still positive for people who have nothing.

Expected utility is positive implies that people have discontinuous utility functions wrt. money. That is, utility will jump significantly after reaching a certain net worth. Another explanation that is consistent with gambling behavior is that people have inaccurate risk functions; that they overestimate positive upside and underestimate downside. I am not familiar with the economic literature. But I believe that th…

You can get a net positive utility gain from a net zero money gain with a continuous function, if it were say, logarithmic. A has 1X$ and B has 10X$, then an exchange occurs where 1X$ moves from B to A, now it's 2X$ and 9X$, but the change in happiness for A could be log(2/1)~=.30 while B log(9/10) ~=-.04

This is just one utility vs wealth model that would argue wealth transfers improve net utility in some contexts.

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