Seeking out unfair fights
I can feel a certain thought, deep in the subconscious bubbling, and then eventually it makes its way to the surface as a more coherent idea. It happens to us when we think, learn, and seek answers. I had one instance of this just now and I wanted to put it down on paper. It’s personal and I doubt it will be of use to anyone else.
It’s about markets, trading, investing.
The thought is this: work relentlessly hard to seek out opportunities that have two skews. A situation where odds of success vs failure are incredibly skewed towards success. The reward vs risk is incredibly skewed where a reward is a multiple higher than risk. The more the better.
Obvious, yes? Finding this is extremely hard. Learn to recognize cases when this happens. But recognition alone without action is just an academic exercise. You need to combine action with recognition for the ultimate pay off. Make sure that the action taken does not have a probability of complete destruction, no matter how remote. Risk should reflect the payoff.
The thought has been swirling around me for months in various incarnations.
This is that idea where you should seek an investment strategy that allows you to be wrong most of the time and still makes money.
I haven’t written down the instances, but I have heard many successful investors say how over time the trades they take on are less frequent but what they take gets vetted left and right until it becomes impossible not to take the trade. They wait and wait and wait for that moment, and then seize upon it.
You have to figure out what to do in between to sustain yourself financially and intellectually in between the breaks. Stay patient, and diligent, and truly get to the point where you are identifying the opportunities that have major skews and you take action.
What made all of this bubble to the surface is the podcast:
http://whatgotyouthere.com/209-yen-liow-episode-transcript/
A paragraph that stopped me in my tracks:
Every time we invest, we say we know more than what the world knows. We do that very, very rarely, but variant perception was the premise of that business model, whether it was informational or other. What do we know that the rest of the world didn’t know? Genghis taught me to just focus on unfair fights.
And then this:
Many of the smartest people on Earth, hyper-motivated, literally trillions of dollars at stake, and so game selection for me was like, where do you focus all this energy? And the starting… That one decision is incredibly important and do it as early as you possibly can.
And this:
And you want to be spending grinding away your skills and focusing on those companies, but the last part of that is how it meshes with who you are? And that’s also really, really critical, that’s another very important part of my evolution as an investor, and as a person quite candidly, is a deep understanding of the authentic self, matching itself with the game selection of a high performance area or skill or strategy.
This is deadly. Transformative. This is what had been brewing in my subconscious and has come to light as a sentence.
Taking your energy, your abilities, seeking the way to focus that energy and ability on a topic/thought/company/task, and making sure the target meshes with you personally. You combine that, and it results in an explosion.
Seek. Learn. Evaluate. Persist. Take Action. Maintain Perspective.
I have experienced the taste of this three times in the last year. All examples are quite intricate and one is very recent and I will not share what it was and how I came about it, but it led to 1:12 risk:reward return (https://www.investopedia.com/terms/r/riskrewardratio.asp).
The most successful example of this I can share, and it’s me stalking and researching GOGO stock. I picked it up the first time on June 22nd, for $2.73 per share. Maneuvered with it for over two months building out a position until August 26th it jumped to $4.94 and eventually settled to $10–12 range. After all that was said and done, it was 1:40 trade. The stock is still going up, catalysts remain behind the scenes that could prop it up into $15–$20 range. It’s a good find now but comes with more risk and the reward is not the same as what you would have gotten if you got in at $3. And it’s super crowded and watched trade, with many people on social media talking about it. But if you had a thesis about the stock before the masses, and jumped on it — the reward is incredible.
But you can’t get lost in the noise of success. You have to recognize how rare of an opportunity this was. How lucky I was to stumble into it through a few people I know and follow, how lucky the company was to execute some of its plans, etc. But with each day the risk was getting smaller and the reward was getting bigger. You have to find it, recognize it, take action to seize it, and then take action to profit. Not an easy task. And even then, you can’t dwell on it and maintain the perspective. Calm confidence, but not get too cute with thinking that you are some sort of genius of finding the gems. You move on to learn more, and keep your eyes open.
