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Save like a pessimist, invest like an optimist

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Re: Save like a pessimist, invest like an optimist

#71

Post by ivalm »

yojo wrote: post #57
dasudasu wrote: post #52

Earlier quoted context omitted.

"In the long term we are all dead" so why would it even matter if over 2100 years your perfect 5% compounding hasn't happened as expected? No place on earth experienced nothing short of complete societal overhaul in that span -- most often multiple times at that.

I threw out some numbers to set a baseline of “this can’t go on forever.” I don’t pretend to know when it starts to transition, or the speed of the transition. The fact that the rate of growth will someday slow means assumptions you make about your 401k may or may not hold if we happen to be at the wrong point on the curve.

But humans also don’t have infinite demand on production. If we have a sufficiently high amount of production per capita (ie we are post-scarcity) then growth becomes irrelevant (especially if overall population isn’t growing, which with current trends seems reasonable). At that point the only thing is to ensure that output distribution is sufficiently equitable. We can then have millions of years of stable happy humanity with zero growth.

Re: Save like a pessimist, invest like an optimist

#72

Post by hsbauauvhabzb »

‘Bankroll management’ concepts in the poker community were a fantastic learning tool about concepts such as variance and risk of ruin. The ‘tldr’ recommendation is to keep 20 x buyins of a cash game or 100 x for tournaments, but inside the nitty gritty, as Opponent skill increases proportionally to your own, Winrate decreases, meaning more buyins are required to offset risk. ‘Running bad’ can last hundreds of thousands of hands too - 100-year disasters happen every few hundred hands in what mentally seems mathematically improbable is actually likely to happen at an unexpectedly high frequency. Even if you have a 10,000 buyin bankroll, there’s no guarantee you won’t go bust even with a significant skill edge. Be a slight losing player and you will forever appear to be ‘running bad’ but just turns out you suck.

Applying this to real world business concepts is interesting too - corona was a great example, and for all we know next year could be unrelated total world war, past has some indication of future trends but only when the sample size is substantially large (in the case of geopolitics and disasters, all known global history is an insignificant sample)

Re: Save like a pessimist, invest like an optimist

#73

Post by marvin »

irrational wrote: post #68
yojo wrote: post #39

I’m skeptical of the closing claim that exponential growth keeps happening forever. Yes, you can grow GDP 2% for 200 years, that results in an economy 50x the start size. Expand it to 1000 years and you’re talking about an economy 400 million times as large. After 2100 years you’re up to an economy a QUINTILLION times as large. At some point the exponential curve has to go S-shaped. Maybe we’re still in the happy exp…

With the world’s population projected to severely contract in the coming centuries, I wonder how that will effect the possibility of exponential growth.

General artificial intelligence, once we figure it out, will cause an increase in the annual economic growth more extreme than even the industrial revolution caused. Either that or a disaster, but hopefully the former.

Anyone who thinks we will run out of things to create just lacks imagination. There's so much stuff we'd really, really like to have but haven't been able to economically create yet. Medicine, body modifications, automation of all that's boring, cheaper manufacturing of everything, entertainment, recreation, transport, space habitats and almost anything else you can imagine.

Re: Save like a pessimist, invest like an optimist

#74

Post by idoh »

sanderjd wrote: post #62

I'm totally philosophically aligned with this article and enjoyed reading it, but I'm just interested to hear whether anyone else has this problem: More and more stuff I read seems to be name-droppy like this. For instance, I've been reading "The Psychology of Money" recently, and I'm enjoying it, but its style is a lot like this article; an endless series of anecdotes about famous and semi-famous people, with insigh…

It’s not a new trend, it is common in non fiction writing. Everything Malcolm Gladwell writes is in this style, and the same for many non fiction business / self help type books.

Re: Save like a pessimist, invest like an optimist

#75

Post by marvin »

smabie wrote: post #51
fairity wrote: post #2

One question that's been top of mind lately for me is how optimistic you should be in your investing strategy. IBK currently allows retail investors to trade on margin with an annual interest rate of only 1% (yes, really). You can borrow up to 2x your principle at this rate. If you were extremely optimistic, you would borrow 2x your principal and expect to 3x your annual return. If you were optimistic but wanted to a…

One should target volatility, not leverage. Without leverage, you can usually only take the most risky of strategies in order to get a return. If you're willing to take on leverage, you are much more likely to find a good strategy. Source: work at a small prop firm that takes on around 10x leverage. Even at this leverage ratio, we are considerably less risky than the S&P 500. Even at 10x, our volatility is somewhere…

And certainly you are well protected against black swan type events, even at 10x leverage...?

Re: Save like a pessimist, invest like an optimist

#76

Post by PopeDotNinja »

yojo wrote: post #55
mjfl wrote: post #46

Earlier quoted context omitted.

Imagine a world with 1 trillion people on it. A new Einstein is born every 10 years. Better access to information, the ability to augment their minds with computers makes them 10x smarter than Einstein was. Is it so hard to imagine that the economy would be 50x bigger in that situation?

It is unclear if the Earth’s carrying capacity reaches a trillion, that’s certainly in the high side of forecasts. It does not look like we’re on a trajectory to hit anywhere near that. I also question the value of genius at driving GDP growth indefinitely. Eventually you run into natural laws that are insurmountable; you can’t genius your way out of entropy. That said, the GDP wall could well be millennia away and w…

I wonder if there’s even remotely enough phosphorus for that many people.

https://en.wikipedia.org/wiki/Peak_phosphorus

Re: Save like a pessimist, invest like an optimist

#77

Post by icedchai »

lotsofpulp wrote: post #69
icedchai wrote: post #64

Earlier quoted context omitted.

I keep roughly 10% of my net worth in cash... That equates to several years of expenses. It may be excessively high but it lets me sleep at night. You joke, but the past year shows something like a zombie apocalypse is a possibility.

In the very worst scenario, you’re going to need guns, source of food, land, and most importantly a network of people who you can call to help defend you (or go on offense with you to acquire necessary resources). The dollar is only useful as long as the US government continues to perform as an organization. However, as the US approaches dissolution, I would expect the value of USD to approach zero as the government…

This is true. However, I think there are a variety of scenarios, less extreme than total societal collapse, where it still may be useful to have a large emergency fund. It may not be rational.

Re: Save like a pessimist, invest like an optimist

#78

Post by marvin »

lotsofpulp wrote: post #69
icedchai wrote: post #64

Earlier quoted context omitted.

I keep roughly 10% of my net worth in cash... That equates to several years of expenses. It may be excessively high but it lets me sleep at night. You joke, but the past year shows something like a zombie apocalypse is a possibility.

In the very worst scenario, you’re going to need guns, source of food, land, and most importantly a network of people who you can call to help defend you (or go on offense with you to acquire necessary resources). The dollar is only useful as long as the US government continues to perform as an organization. However, as the US approaches dissolution, I would expect the value of USD to approach zero as the government…

>or go on offense with you to acquire necessary resources

Are you seriously suggesting, on a hacker forum, to be prepared to use the proceeds of your emergency fund to violently steal life-critical resources from other people in a crisis?

I really hope I've misunderstood, and you're using the phrase "go on offense" as a euphemism for deer hunting.

Re: Save like a pessimist, invest like an optimist

#79

Post by paulpauper »

pretty generic advice

>Compounding is easy to underestimate because it’s not intuitive, even for smart people. Michael Batnick once explained it. If I ask you to calculate 8+8+8+8+8+8+8+8+8 in your head, you can do it in a few seconds (it’s 72). If I ask you to calculate 8x8x8x8x8x8x8x8x8, your head will explode (it’s 134,217,728).

what does this have to do with anything. no kidding that multiplication is harder than addition (it requires many additions).

Using Microsoft and Bill Gates as an examples is major example of survivorship bias. What about the hundreds or thousands of other companies and founders that tried such an approach and still failed. Yeah, in hindsight anything Microsoft does will look like genius given how successful Bill Gates and Microsoft are. if Bill gates had policy of tying his shoes at work instead of at home, people would probably read into that as part of his success.

Re: Save like a pessimist, invest like an optimist

#80

Post by emteycz »

ben_w wrote: post #50
emteycz wrote: post #41

Earlier quoted context omitted.

Consider the last 2000 years. The global market went from nothing to outlandish emperor-level luxuries available to multiple billions of humans + all the stuff that we have that even emperors didn't imagine. I think quintillion times growth in "actual value to humans" is not that off. And thinking about the next 2000 years, I don't see any hard limits there too.

A quintillion is larger than the ratio of a synaptic refractory period and a human lifetime by a factor of about 1.5 million. Even with my optimism about transhumanism, I’d be very surprised if that was accurate or will ever be.

It's not about transhumanism, it's simply the (Kardashev) scale of society.
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