Daniel report

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Conversation: Tim Ferriss at Oxford Union

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History: The Great Depression Chart of Pompous Prognosticators

1.  “We will not have any more crashes in our time.” - John Maynard Keynes in 1927

2.  “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.” - E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

“There will be no interruption of our permanent prosperity.” - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3.  “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”  – Calvin Coolidge December 4, 1928

4.  “There may be a recession in stock prices, but not anything in the nature of a crash.” - Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

5.  “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.” - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

“This crash is not going to have much effect on business.” - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

“There will be no repetition of the break of yesterday… I have no fear of another comparable decline.” - Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

“We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices.” - Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6.  “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.” - R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

“Buying of sound, seasoned issues now will not be regretted” - E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

“Some pretty intelligent people are now buying stocks… Unless we are to have a panic — which no one seriously believes, stocks have hit bottom.” - R. W. McNeal, financial analyst in October 1929

7.  “The decline is in paper values, not in tangible goods and services…America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin.” - Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

“Hysteria has now disappeared from Wall Street.” - The Times of London, November 2, 1929

“The Wall Street crash doesn’t mean that there will be any general or serious business depression… For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.” - Business Week, November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”  – Harvard Economic Society (HES), November 2, 1929

8.  “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.” – HES, November 10, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.” - Irving Fisher, Professor of Economics at Yale University, November 14, 1929

“In most of the cities and towns of this country, this Wall Street panic will have no effect.” - Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

“Financial storm definitely passed.” - Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9.  “I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.” - Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

“I am convinced that through these measures we have reestablished confidence.” - Herbert Hoover, December 1929

“[1930 will be] a splendid employment year.” - U.S. Dept. of Labor, New Year’s Forecast, December 1929

10. “For the immediate future, at least, the outlook (stocks) is bright.” - Irving Fisher, Ph.D. in Economics, in early 1930

11.  “…there are indications that the severest phase of the recession is over…” - Harvard Economic Society (HES) Jan 18, 1930

12.  “There is nothing in the situation to be disturbed about.” - Secretary of the Treasury Andrew Mellon, Feb 1930

13.  “The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.” - Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930

“… the outlook continues favorable…”  – HES Mar 29, 1930

14.  “… the outlook is favorable…”  – HES Apr 19, 1930

15.  “While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” - Herbert Hoover, President of the United States, May 1, 1930

“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…”  – HES May 17, 1930

“Gentleman, you have come sixty days too late. The depression is over.” - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16.  “… irregular and conflicting movements of business should soon give way to a sustained recovery…”  – HES June 28, 1930

17.  “… the present depression has about spent its force…” – HES, Aug 30, 1930

18. “We are now near the end of the declining phase of the depression.”- HES Nov 15, 1930

19.  “Stabilization at [present] levels is clearly possible.” – HES Oct 31, 1931

20.  “All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.” – President F.D. Roosevelt, 1933

Colin J. Seymour, June 2001

http://www.users.dircon.co.uk/~netking

[danielreport]

Insight: 100 Years of DJIA

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Humor: Wall Street Cartoons

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Gallery: NYSE in the Old Days

[danielreport]

Gallery: Panic of 1907 

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Gallery: The Great Depression Photo Series

[danielreport]

Essay: Tim Ferriss on investing

I’ve learned quite a few things in the last 18 months of exploring—and experimenting with—the world of investing. This post is my first attempt to share the findings.

The lessons have come from not just reading books, but trial and error, and picking the brains of some diverse and fascinating people:

-Warren Buffett, the richest man in the world, and CFOs/financiers at Berkshire’s portfolio companies -Chief economists at top investments banks -Dot-commers who have turned $40,000 into $2,000,000 in stocks using massive leverage -Conservative entrepreneurs (still self-made millionaires) with all-bond portfolios -Money managers of the ultra-rich and ridiculously famous -Ivy league professors who not only trade options exclusively but also bet up to $500,000 per night as no-limit hold ‘em poker players.

In all cases, excluding blog reader feedback (how could I know?), the principles I will offer are from people who have made millions in their respective investments, not armchair quarterbacks (advisers) who take a management fee from the people willing to take real risks…

Total read time for this post: 6 minutes.

I’ve lost a little money, made more money (with “risk capital,” about 28% annualized over the last three years), and preserved almost all of my money. I’m terrified of certain things, but I build my irrational decision-making and temporary stupidity into the planning.

Let’s start off with some smart observations from readers of this blog, who commented on my post where I described Warren Buffett’s answer to my question, which recentlymade it into Berkshire’s new annual report! Here it is:

“If you were 30 years old and had no dependents but a full-time job that precluded full-time investing, how would you invest your first million dollars, assuming that you can cover 18 months of expenses with other savings? Thank you in advance for being as specific as possible with asset classes and allocation percentage.”

The observations I have picked out for discussion follow, and I’ve tested most of them. Some will sound complex, but this series will reduce it all to simple conclusions anyone can use:

From Lee:

For someone so risk seeking in your personal life, I’m surprised at your risk tolerance rate of 10%. From reading your blog, it seems like you live your life experiences with a 50% risk tolerance rate.

[Tim: This is a common misconception. I actually consider myself very conservative and risk-averse in both life and investment, and my close friends can confirm this. As we'll see, the phrase "risk tolerance" is hugely problematic, but behind the scenes, I micro-test the hell out of options to determine what has the best chance of a high return-on-investment (ROI), but this isn't transparent to most observers, who assume I regularly roll the dice and hope for the best. Not true.]

Patrick Clark [Tim: if you take nothing else from this post, re-read the bolded portion a few times and memorize it, especially the last sentence]:

I am going to make a few assumptions here:

1. You are an accredited investor. 2. Your businesses will continue to run themselves and create cash flow income for you. 3. This $1 million is true risk capital.

That being said, I am a investment advisor. I create portfolios for clients in both traditional asset classes (stocks, bonds, cash, and real estate) and non-traditional asset classes (raw materials, energy, metals, and currencies). This provides a mix of investments that are uncorrelated to one another.

Without getting into specific investment vehicles, an asset allocation will look something like this:

US Equities – 24.5% International Equities – 19.5% Real Estate – 3% Raw Materials – 12% Energy – 12.5% Metals – 12% Currencies – 6% Cash – 10.5% The goal is to produce an absolute return. For my clients, I am not interested in having the following conversation, “The market was down 40% this year, Mr. Jones, but we only lost 18%. We did a great job!” No. A loss is a loss. By setting up a portfolio for absolute return, not relative returns, your chances of forwarding the ball every year is much greater.

Remember, a 50% loss requires a 100% gain to get back to even. Don’t lose.

Luca:

cash IS an asset during bear market.

From D:

Find an investment style that fits your personality, then backtest that strategy [Tim: for those of you mathematically inclined, search for "Monte Carlo simulation"] over long & varied starting/ending periods to see if you can stomach the maximum drop (”drawdown”). And stick with it…forever. No one can predict the market, you never know if you’re about to buy before a big dip.

It’s true that growth stocks outperform a helluvalot of other asset classes over the long haul.

But, someone who put all their money in the S&P500 index on 1/3/2000 lost about -50% (by October 2002) and is still losing money eight years later! Most might throw in the towel at that low point, when they should have been adding. The pain of losing is alot stronger than the hope of winning.

Superstar investor via phone:

92% of your return is determined by asset allocation, 6% my manager/stock selection, and 2% by timing. Russ Thornton:

Once your target allocation among the chosen funds had been determined, I would rebalance back to your target allocation when any single asset class deviated 20% from it’s target. There is meaningful data supporting this rebalancing trigger. You could also rebalance with additional savings which is a much more tax efficient approach and will reduce your capital gains realization. Rebalancing forces you to buy more of the relatively less expensive asset class in a classic “buy low” discipline [Tim: versus selling the higher-priced asset].

That’s about it. Buy when you have money and only sell when you need the money, but not before.

Lee:

I like Taleb’s idea of 90% in government bonds and 10% in highly speculative stocks.

More conventionally, I’d follow a highly diversified strategy as suggested by Swensen (Yale) in his books, adjusting the bond percentage up or down as dictated by risk tolerance:

stock funds: large blend index (S&P 500) small value index International index Real estate Index Commodities (PIMCO real return)

bonds: TIPs Short term treasuries

Bex:

You can have a pretty diversified portfolio, even if you only own 10 stocks.

Henrik:

So basically, for the most stable returns, invest in a set of assets that do not go up or down at the same time. That means you need international as well as US exposure, and debt (bonds/money mkt) as well as stocks. [Tim: these are also called "negatively-correlating asset classes," common in pair trading, which Buffett did quite a lot in the 1970's and 80's]

Oliver:

Your allocation should be approximately as follows:

90% TIPS 10% Call options on the S&P500

This means you’ll lose almost nothing if the market tanks but you’ll still get a lot of the return of the S&P500 on the upside.

The first lesson is: you don’t know what you think you know.

Think you can predict your risk tolerance? I bet you can’t.

Let’s try another question that will drive the point home:

Would you call yourself a racist? I bet you wouldn’t, and I bet you are.

Take the Harvard Implicit Association Test (IAT) for race as many times as you like. I’m not a betting man, but I’ll bet you come up as racist, regardless of race.

Surprising? Perhaps.

I’ve come to realize that the questions most investment advisers (and investors) ask are the wrong questions, or incomplete. Even if you have only $100 to invest, this is important to explore.

Most advice and decisions center on one question: what is your risk tolerance?

I had one wealth manager ask me this, and I answered honestly: “I have no idea.” It threw him off. I then asked him for the average of his clients’ responses. The answer:

“Most answer that they would not panic, down up to 20% in one quarter.”

My follow-up question was: when do most panic and start selling low? His answer:

“When they’re down 5% in one quarter.”

Unless you’ve lost 20% in a quarter, it’s hard—neigh, impossible—to predict your response. It’s not to dissimilar from a common boxing maxim: everyone has a plan until they get punched in the face.

False assumptions about your future decision making almost guarantees failure, so either 1) dial back your supposed “risk tolerance”, or 2) simulate the loss with smaller amounts but higher risk investments before betting the farm. I use angel investments in tech start-ups for this purpose.

It need not be $100,000—go to the horse track and make conservative bets (high-probability, low pay-out) at $25 a race until you lose $200 (FYI: here’s how I learned to bet on horses). How do you feel? That’s the starting point: accurately gauging emotional responses to gain or loss.

Your decisions, and investment future, depend on calibrating accurately.

There were 4-6 screens per person, and chairs were lined up at a single 30-foot desk in hierarchical pecking order. Commands would come down the line and trades were made.

“Who the f*ck are you?” asked one of seniors, swiveling back to his glowing screens before I could answer.

It was my first time inside one of the largest investment banks on the planet, and I was just observing a friend in the hopes of learning something. Before I knew it, lunch had arrived and a 20-minute break was announced in a poetic slew of 4-letter words.

“Name a company.” It was a voice I didn’t recognize, but it was clearly directed at me. “Uh… sorry. Excuse me?” I asked to the room and no one in particular. “Name a company.” “Uh…” “Any company — doesn’t matter.” “OK. Ah… Genentech.” It was a shot in the dark with no rhyme nor reason. “F*ck Genentech!!!” came the chorus.

“OK, we just sold 100,000 shares of Genentech. F*ck those guys. Lost a ton on them last week.”

100,000 shares of Genentech sold because a no-nothing guest had pulled the name out of thin air.

That was my introduction to how truly rigged the stock market is…

Information Advantage

“One trader remembers that Lewie [head of Salomon Brothers' mortgage department] would say he thought the market was going up, and buy a hundred million [dollars' worth of] bonds. The market would start to go down. So Lewie would buy two billion more bonds, and of course, the market would then go up. After he had driven the market up, Lewie would turn to me and say, ‘See, I told you it was going to go up.’” -Liar’s Poker, Chapter: The Fat Men and Their Marvelous Money Machine

I currently have less than 10% of my net-worth in stocks. Why? I don’t have an “information advantage”. If other words, I’ve seen the sharks in this ocean, and I want no part of it. They’ll eat my Barron’s-reading ass alive. I’d rather put my capital in angel investing and the few industries I understand, two areas where I have insider knowledge and connections that others don’t.

To quote billionaire Mark Cuban (great blog here) in his short interview with Young Money (YM) magazine:

YM: Do you have any general saving and investing advice for young people?

CUBAN: Put it in the bank. The idiots that tell you to put your money in the market because eventually it will go up need to tell you that because they are trying to sell you something. The stock market is probably the worst investment vehicle out there. If you won’t put your money in the bank, NEVER put your money in something where you don’t have an information advantage. Why invest your money in something because a broker told you to? If the broker had a clue, he/she wouldn’t be a broker, they would be on a beach somewhere.

Here’s the deal — to beat the market consistently, you have to: 1) have better information than most people, 2) have superior analysis of the same information, or 3) have better luck than a Leprechaun.

Discarding luck as a strategem, and personally discarding better analysis because I don’t want to spend my life poring over annual reports or evaluating algorithms, there is a simple conclusion: don’t invest in anything that you don’t know inside and out better than most of the world.

From David Swensen, who ended 2007 up 28% as the investment manager of the Yale University endowment:

“You have to diversify against the collective ignorance… I think nobody is in a position to react to these big macro-issues. Where is the dollar going to be or what is G.D.P. growth going to be in China? For every smart person on one side of the question, there is another smart person on the other side.”

Having come out of Princeton and the land of Burton Malkiel, I agree with efficient market theory insomuch as “information advantage” is a prerequisite to consistently getting better returns than average.

If you don’t know something the rest don’t, don’t gamble.

Period.

The Weasel Word: “Investing”

In part 1 of this series, I promise my favorite picks for investing books. Though I’ve read several dozen based on recommendations from self-made millionaires (I try not to take advice from speculators), here are the few I’ve found most useful:

The Essays of Warren Buffett: Lessons for Corporate America (Buffett) The Smartest Investment Book You’ll Ever Read (Solin) Liar’s Poker (Lewis) Seeking Wisdom: From Darwin to Munger (Bevelinl; Parts 2-4) Less is More: An Anthology of Ancient and Modern Voices Raised in Praise of Simplicity (VandenBroeck)

What?! It seems like philosophical books have been mistakenly put on this list, no? Here’s the rub: after all the research and mind-numbing number crunching, I’ve decided that the philosophical decisions take precedent over the tactical ones. For me and those whose lives I most admire, at least.

One qualified commenter on the last investing post said:

“I don’t think you’re going to figure out investing in a matter of weeks or months.”

Well, this brings up an interesting question, doesn’t it. What the hell is “investing”, exactly?

If you have the potential to make 30% per annum in a given stock, but it keeps you up with sweaty palms at night, is that a good “investment”?

Is a stock with a projected 25% annual growth rate over 10 years a good “investment”, even though it will lose value every year except for one undetermined year with a 259% increase?

I sat in on another friend’s job once. He was a day trader, and his boss made more than $50,000 per day in most cases. But, this boss also carried divorce papers in his briefcase 24/7 “just in case he’d had it with the bitch.” Do you want his life? Is he a successful “investor”? Be careful with that term.

In the 100+ comments on the aforementioned post (some of the commenters manage 9-digit funds–hundreds of millions of dollars), definitions of “investing” range from “gambling” to “asset allocation.” In other words — “investing” as a term is so overused as to have become meaningless.

I propose that we define investment as a broad concept and then separate it out. First, the broad definition:

Investing = “Allocating resources to improve quality of life.”

This applies to financial investment as much as it does time management and all other resources. How much would your behavior and results change is you just replaced the concept of “time management” with “time investment” in your head?

Using this definition of investment, I would not chase the moving target of pure ROI (after all, there is always a more speculative vehicle with potential higher gains), but choose the vehicles that offers the greatest ROI with the least insomnia. More cash with constant sweat in the palms is hereby defined as a poor “investment.”

Moving from conceptual to tactical, we can also separate “investment” into three categories of actions, which I’ve found useful:

Investment =

-Asset/wealth creation -Asset/wealth allocation -Asset/wealth preservation

http://www.fourhourworkweek.com/blog/2008/10/21/rethinking-investing-common-sense-rules-for-uncommon-times/

http://www.fourhourworkweek.com/blog/2008/11/03/rethinking-investing-part-2-plus-election-thoughts/

[danielreport]

Anecdote: British Comedians Bird and Fortune on the Subprime Crisis

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Essay: Protecting the American Dream Should Be the President's Top Priority

When I was appointed dean of Harvard Business School in 2010, it was an achievement that led me many a time to say, "Only in America!" Where else could an immigrant who came to attend graduate school on a scholarship be chosen as dean of one of the country's leading business schools? My story is a vivid reminder of just how meritocratic American society is.

My current job is just one in a series of blessings that have formed my personal version of the American Dream. Many people equate the American Dream with the attainment of a key set of possessions -- a car and a home, for instance -- or a steadily rising standard of living. While those are certainly desirable, in my view the more important element differentiating the U.S. economy from most others is its social mobility. Warren Buffett likes to talk about the "ovarian lottery" that determines the destiny of citizens in many other countries, where one's lifelong status is more-or-less determined by the identity of one's parents. The United States, in contrast, has a surplus of self-made men and women (including Buffett) whose up-from-bootstraps achievements help inspire the generations that follow to work hard and pursue their ambitions.

No matter how you define the American Dream, it's clearly facing new challenges -- a situation brought into high relief during the U.S. presidential election. On the stump, at the conventions and in the debates, both candidates touted their plans to improve the fortunes of the middle class, whose anxieties about stalled mobility have become so palpable. Those fears are understandable. Long before the Great Recession, secular shifts -- globalization, technology, contingent workers, and the decline of unions, among other forces -- had devalued the skills on which many Americans depend for their livelihood. The recession has exacerbated that trend. For the first time in our lives, the promise of upward mobility -- the core of the American Dream -- can no longer be taken for granted. Now that the elections are over, the top priority for the new president is to enact policies that support job growth and reduce worker anxieties -- or, to put it another way, to find ways to ensure that the American Dream remains alive.

As someone born overseas who came to America in 1984, but became a U.S. citizen a decade ago, I have both an outsider and insider's perspective on what makes the American model so distinctive. This week, as our country's executive leadership begins its quadrennial shift from the business of campaigning to the business of governing, let me offer three thoughts to keep in mind as we attempt to find ways to renew and support the American Dream.

First, we must recognize that the American Dream has effectively gone global, largely because the United States has successfully exported the ideals behind it. When I travel to Brazil, China, India and Malaysia (among other places), I encounter people with a newfound sense of opportunity and optimism. Yes, these people increasingly own the trappings of middle class life: televisions, automobiles, smartphones and status-conscious clothing. But more importantly, they possess ambitions that were once unimaginable. Societies where parents once suppressed their children's aspirations (because their futures were already determined by the "ovarian lottery") are now brimming with an entrepreneurial spirit. The sense that young people in these places need to emigrate to fulfill their ambitions -- a pervasive feeling just a few decades ago -- is abating. If the 20th century was the American Century, we're now in a Global Century, one in which what Fareed Zakaria calls "the rise of the rest" is the dominant narrative. While there are many positive results from this shift, we need to recognize that America's gravitational pull will decline as people born in other lands encounter better opportunities to reach their dreams at home. In an era when the United States routinely depends on immigrants to fill important scientific and technical positions, and to start or lead companies from Google and Intel to Coca Cola and Pepsico, we can no longer take for granted that top talent will immigrate to the U.S. in the 21st century as frequently as it did in earlier times.

Second, it's imperative that we understand the pernicious and corrosive effects that envy can have on the American Dream. America has always been an ambitious place, so people born here may not realize how different attitudes can be in other countries--places I think of as having "envy economies." It's an attitude I've witnessed most vividly when talking with colleagues brought up in Communist countries, where parents actively tamped down children's dreams. Over time, the economics of envy reduce agency, and make people attribute outcomes to forces beyond their control. It shifts people's gaze towards others in a negative way, and takes their focus away from their own goals. In an ambition economy, people enjoy watching others get ahead, because it reinforces their sense that they can succeed, too. In any envy economy, in contrast, people often feel like they're playing in a zero-sum game, and that if someone else gets ahead, it comes at their own expense. Lately there are signs that America is shifting from an orientation of ambition toward one of envy -- an attitude that can be seen when the 99 percent protest against the success of the 1 percent, or the 53 percent rail against the dependency of the 43 percent. That's a shift we want to avoid. The politics of envy divides us, whereas the shared ambition of pursuing the American Dream unites us.

Third, while it's important to recognize the myriad challenges that threaten social mobility -- including, in addition to globalization and technology, the weak labor market and the high cost of college -- it's crucial that we not become paralyzed or hopeless in confronting what seems like insurmountable problems. Sometimes reframing the problem to focus on individual behavior, instead of large societal forces, can help. Toward that end, instead of asking "How can we fix the American Dream?" individuals may be better off asking themselves "Am I acting in ways that support that dream in my own life?" As Thomas Friedman wrote in September, instead of following Bill Clinton's simple 1992 formula of "working hard and playing by the rules," in today's economy, people who want a decent job and a good life "have to work harder, regularly reinvent yourself, obtain at least some form of postsecondary education, make sure that you're engaged in lifelong learning and play by the rules."

That may seem a daunting list of prescriptions. But it's on target, and it's a reminder that despite the faith voters show when casting a ballot for the candidate of their choice, restoring the American Dream is task that's both collective and individual. Our larger dream is, after all, a mosaic made of millions of smaller ones -- and while we can hope for the next president to create an atmosphere that's more conducive to letting citizens get ahead, we must remember that it's individuals who supply most of the momentum for that climb.

http://www.huffingtonpost.com/nitin-nohria/social-mobility-america_b_2113933.html

[danielreport]

Lesson: Rothschild

[danielreport]

Lesson: Your Personal Bucket List

6 steps for crossing anything off of your personal bucket list via Tim Ferriss...

“Concerning all acts of initiative (and creation), there is one elementary truth, the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it. Begin it now.”

-- William Hutchinson Murray, The Scottish Himalayan Expedition (1951)

#1. Stop and think about it. Really think about it.

What is it that you really want to do with your life? Start a business? Reconnect with an old friend? Dive to the bottom of the ocean? Smoke a cigar with Castro? Forget what you think you should do, what excites you? What feels impossible? Be honest with yourself. Your answers don’t need to make an impression on anyone but you.

For many people, the four members of The Buried Life included, the impetus to make a life change only comes with crisis. The summer before we started The Buried Life, I was struggling with depression; Dave was struggling with his weight; Duncan had recently lost a close friend; and Jonnie was just plain angry and disillusioned with our generation (“No one protests anymore,” he used to say). The four of us were so beaten down that we had no choice but to reevaluate what was important to us. Our project grew out of that frustration. Sometimes it takes a debilitating low or a crushing loss to snap you back to reality, but don’t wait for it. Ferris Bueller put it well: “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”

#2. Write it down.

Simply put, it’s not real until you write it down. And by that I mean, take your dream and turn it into a project. Dreams have a funny way of staying dreams. But a project is something that needs to be done. Approach it as you would any other item on your daily or weekly to-do list. When you have a deadline— a presentation, a grocery list, a birthday gift you need to buy for someone–you find a way to get it done. Treat your dreams the same way. Add it to your list. You need to buy toilet paper. You need to spend the weekend in Paris with someone you love. When you write it down, you’ve taken the first step.

When we first started the project, we put things on the list almost as a joke. We didn’t think about whether they could actually happen; we just pretended that anything was possible. “#53: Make a TV Show” was a dream we’d shared since we were young. We had no filmmaking background and no connections in the business. And we lived on an island in Canada. We decided MTV in the States would be the place to have a show because it was the biggest and best platform we knew of for reaching people like us. So we wrote it down. And then we started filming it, because that was just the next logical step. Every step led to the next. Four years later, we were executive producers and creators of our own show on MTV.

#3. Talk about it.

Everyone knows someone who knows someone who knows someone.

After you’ve come up with your list and written it down, start talking. Tell everyone you know. Tell your parents’ friends. Tell new people you meet. Talk to your cabdriver. Talk to your boss. You never know whose uncle’s wife may be able to help you. And don’t just talk about it, but talk about it passionately. Enthusiasm is infectious, and people want to help when given the chance. Help can show up in the most unusual places, oftentimes the least expected ones.

We didn’t come from money. We had an idea, we talked about it, and people showed up in incredible ways help us. Our first lawyer was our parent’s friend who had heard about what we were doing and offered to lend a hand; our first manager was my godmother; I met my first Hollywood contact while traveling in Mexico; we cold-called local companies in our hometown to raise money for our first tour. Help often came in strange places. In 2007 we were able to finagle a five-minute meeting with Jann Wenner, legendary founder of Rolling Stone magazine, in order to discuss what it would take to cross #15 off our list, “Get on the Cover of Rolling Stone.” The five-minute meeting turned into a 45-minute meeting (after Jann threatened to kick us out and asked his assistant for a knife), during which time we talked about everything from protests to Bob Dylan to the difference between our two generations. We told him about some of our most ambitious dreams, including “#19: Write a Bestselling Book.” Jann was later instrumental in helping us get our book published—introducing us to a company where we met the smartest, most talented, best-looking book editor alive (hi Lia), who eventually offered us a deal.

#4. Be persistent.

Most people give up just before they reach their goal. We all hear “No,” a lot, but we’ve come to realize that “No” usually just means “Not now.” Be creative in your persistence. Don’t piss people off by nagging them—think of innovative and clever ways to grab their attention. Be different, and never say die.

Last year, we broke into the Playboy Mansion. We rented a giant stripper cake and decorated it like it was for the Willy Wonka–themed party. Two of us dressed up like Oompa-Loompas and hid in the bottom of the cake, which was then delivered to the back door of the Playboy Mansion in a rented delivery truck. Security saw our homemade Playboy logo on the cake and allowed it to pass through the gates. After waiting inside the cake for six long hours (peeing in bottles and filming in night-vision), we hatched out unnoticed and partied at the Mansion all night with free rein. Security assumed we were just very rowdy employees.

Playboy had no idea we had been in and out, or that we had filmed our first episode. But when we went back a month later to ask for permission to air, they said, “If you air the episode, we’ll sue you and have you charged with breaking and entering.” We got ahold of the company’s vice president, and he echoed that sentiment. MTV told us to move on and film another episode. Our production company said there was nothing we could do. In a last ditch effort we decided to send Hugh Hefner a handwritten letter along with the rough cut of the episode. A week later, we received this response from Mr. Hefner himself: “You can air the episode. Just know I’m not very pleased with you boys.” I always thought that crashing the Playboy Mansion was my dream, but getting scolded by Hugh Hefner was way better.

#5. Be ballsy.

The majority of people don’t go after their wildest dreams because they think they’re unrealistic. Tim says it well: “Ninety-nine percent of people believe they can’t do great things, so they aim for mediocrity.” The level of competition is highest for realistic goals because most people don’t set high enough goals for themselves. But not only do you statistically have a better chance of achieving what may seem like an unrealistic goal, doing so fuels you. Once you feel the first high of accomplishing something major and seemingly unattainable, you want to go bigger and badder, and you force yourself to fulfill the need all the more. Even better, the technically smaller goals suddenly seem less daunting.

We put “#95: Play Ball with the President” on the list because it was literally the most unattainable goal we could think of. I remember Jonnie called me from his dorm room in Montreal in 2008 right after Barack Obama had been elected and Jonnie said, “We should add ‘Play Ball with Obama’ to the list.” I chuckled because it was so absurd and agreed. I found it humorous not only because the idea was so outrageous but also because I knew Jonnie was calling me from his “room,” a tiny space he was renting for $200 a month, which he shared with a washer and dryer. Of all people, we weren’t the best candidates for a pick up game with the leader of the Free World. Nonetheless, two years later we found ourselves shooting hoops with the President in the backyard of the White House. It’s a long, complicated story, and I don’t want to bore you with the details, but this is the kind of thing that the four of us chuckle about sometimes. It’s as if we have horseshoes up our butts, but it’s also happened too many times to be luck. When you dream big, you surprise yourself.

[TIM: I prodded Ben for the details about Obama, and it's anything but boring. Here's how it happened. First off, Obama only plays when Reggie Love is on the court. Reggie Love is the President's "body man" or, more formally, "special assistant and personal aide," and this b-ball detail made Reggie the man to look for. The gents called everyone they could think of (senators, legislators, etc.) who could e-mail or otherwise contact Reggie. He ultimately liked the idea, but, when passed up the flagpole, it was vetoed by the White House press team. The Buried Life had to end the "Obama" episode on a disappointing "To Be Continued..." Then, the crazy part: The President is up late one night, flips on the TV and randomly sees the end of the episode. Soon thereafter, someone approached Reggie at the White House: "POTUS is pissed." When Reggie asks POTUS what's wrong, he replies: "Why haven't I played basketball with The Buried Life guys?" Reggie explains that he ran it through the press team and they refused, to which Obama replies, "Let's make it happen." The next time the boys are in DC, Reggie invites them to check out the White House courts. While casually shooting around, the President strolls up and surprises all of them. After 20 minutes of hoops together, they ask the President, "What do you want to do before you die?" The answer? "Be an anchor on SportsCenter for a day."]

  #6. Help others.

We’ve crossed off more than 80 list items over the last six years, but the moments that stand out the most are the ones when we’ve been able to step into someone’s life and share something real with them. I’ve been surprised by how little it takes to impact someone’s life. Something as simple as asking the question, “What do you want to do before you die?” and taking the time to listen is often all it takes. If you’re feeling lost or depressed, you might find what you’re looking for in someone else. Into the Wild said it best: “Happiness is only real when it’s shared.”

The first person we ever helped was a guy named Brent. He wrote to us in broken English saying his biggest dream was to bring pizzas down to the nearby homeless shelter. Brent had himself spent three years living in that shelter and remembered fondly the days people brought in food because those were the times it felt like someone gave a damn. When we talked with Brent in person, we learned that what he really needed was a truck. He had pulled himself out of the shelter by starting a business that relied on his truck, but it had just broken down. We knew we needed to help him find a new vehicle, but we didn’t have the money ourselves. This is the very first video we ever made, trying to track down a truck for Brent.

#7. Your Turn.

Your dreams are closer than they appear. There’s nothing about us four guys that makes us more able than anyone else to accomplish our goals, other than the simple fact that we’ve decided to go after them. George Elliot said, “It’s never too late to be what you might have been.” Don’t wait. Why not start now? Post one thing you want to do before you die in the comments below.

http://www.fourhourworkweek.com/blog/2012/04/04/playing-b-ball-with-obama-6-steps-to-crossing-anything-off-your-bucket-list/

[danielreport]

Lesson: Bill Clinton on Networking

Useful tips on quality networking via Tim Ferriss and Christine Comaford-Lynch:

When he is talking with you, it seems you are the only person in the world. His focus is intense, but softened with his southern charm.

Step 1, he makes you feel important, so you listen up.

Step 2, he has the 2 key qualities I learned from Bill Gates and Larry Ellison: 1) supreme self-confidence (this is a choice, by the way you often have to adopt it before you have evidence to back it up) and 2) an unshakable core (no matter what is thrown at Bill and Larry, they shake it off, hunker down, and emerge triumphant).

The rich and powerful think, act, and speak differently from the rest of us. If you try adopting supreme self-confidence, even for a day, you'll be stunned by how the world responds. It treats you as if you deserve everything you ask for. Contacts are just names and numbers. Connections are meaningful relationships that enhance your life. Yes, they take more work. But life = the people you meet + what you create together.

It's all about relationships. Enter the room and stop your thoughts. Don't look for VIPs, simply feel the room and let yourself be drawn to people. Then introduce yourself and ask what business they are in, how they got into it, and what their ideal customer is. DON'T talk about yourself. People say life is 90% about showing up. That's nonsense. Life is 90% about following through. Tell someone you appreciate them daily. This can be done via email, via the phone, or in person. Watch the personâs face light up as you genuinely express why you appreciate them. Then move on. You're not doing this to get them to return the gesture. You're doing it because it spreads great energy, it's fun, and it strengthens your connection with the human race.

http://www.fourhourworkweek.com/blog/2007/08/13/networking-tips-from-the-white-house/

[danielreport]

Insight: Long-Term Interest Rates 1790-2011

[danielreport]

Essay: Eric Schmidt & Cohen on Digital Innovation

Very insightful essay on digial innovation and all sorts of interesting bits and pieces on technology...

Link to PDF:

https://www.dropbox.com/s/99whpqy93lt3shq/TheDigitalDisruption.pdf

[danielreport]

Lesson: Market Wisdom by Jason Zweig

The Kirk Report is sharing market lessons drawn from famed investor Jason Zweig...

There are only three kinds of investors – those who think they are geniuses, those who think they are idiots, and those who aren’t sure.

One of the clearest signals that you are wrong about an investment is having the hunch that you are right about it.

Investors who focus on price levels earn between five and ten times higher profits than those who pay attention to price changes.

The only way to be more certain it’s true is to search harder for proof that it is false.

Business value changes over time, not all the time. Stocks are like weather, altering almost continually and without warning; businesses are like the climate, changing much more gradually and predictably.

When rewards are near, the brain hates to wait.

The market isn’t always right, but it’s right more often than it is wrong.

Often, when we are asked to judge how likely things are, we instead judge how alike they are.

Most of what seem to be patterns in stock prices are just random variations.

In a rising market, enough of your bad ideas will pay off so that you’ll never learn thatyou should have fewer ideas.

The more often people watch an investment heave up and down, the more likely they are to trade in and out over the short term – and the less likely they are to earn a high return over the long term.

Investing is not you versus “Them”. It’s you versus you.

The single greatest challenge you face as an investor is handling the truth about yourself.

Hindsight bias keeps you from feeling like an idiot as you look back – but it can make you act like an idiot as you look forward.

Ignorance of our own ignorance haunts our financial judgments.

Investing requires taking a stand on at least some of the uncertainties that the future holds. So your goal is to be as sure as possible that you don’t think you know more than you really do. How much you know is less important than how clearly you understand where the borders of your ignorance begin. It’s not even a problem to know next to nothing, as long as you know you know next to nothing.

Being part of the herd is fun while it lasts, but it’s seldom lucrative for very long, and it’s impossible to predict when the herd will change its “mind.” If you want to make more money than other people, you can’t invest like other people.

Knowing, or even imagining, that someone else is relying on your advice can make you feel more accountable, forcing you to go beyond your gut feelings and fortify your opinions with factual evidence.

Find out who has a negative view and give this devil’s advocate a full hearing.

Whether you should take a risk depends not just on the probability that you are right but also on the consequences if you are wrong. You must always weigh how right you think you are against how sorry you will be if you turn out to be mistaken.

We are often most afraid of the least likely of dangers, and frequently not worried enough about the risks that have the greatest chances of coming home to roost.

When an intangible feeling of risk fills the air, you can catch other people’s emotions as easily as you can catch a cold.

Overreacting to raw feelings “blinking” in the face of risk is often one of the riskiest things an investor can do.

There’s safety in numbers only when there’s nothing to be afraid of.

Many of the world’s best investors have mastered the art of treating their own feelings as reverse indicators. Excitement becomes a cue that it’s time to consider selling, while fear tells them that it may be time to buy.

A mistake that stems from an action hurts worse than a mistake that results from inaction.

Once you have a handful of options, adding even more choices will lower you odds of making a good decision and increase your chances of regretting whatever decision you do make.

The harder the choice feels, the less people want to choose. Yet, the threat of having less choice almost always disturbs us.

The closer you come to hitting your target, the more regret you are apt to feel if you miss it.

The human brain is a brilliant machine for comparing the reality of what is against the imagination of what might have been.

There’s no end to the roads not taken.

Investors probably hurt themselves more by avoiding risks they imagine they might regret than by taking risks they really do end up regretting.

Instead of making judgments one at a time, you should follow policies and procedures that put your investing decisions on autopilot.

The more you can automate your investing, the easier it should be to control your emotions.

The pleasure you expect tends to be more intense than the pleasure you experience.

We often find out that what we thought we wanted before we got it is no longer what we really want once we have it.

There are two tragedies in life. One is to lose your heart’s desire. The other is to gain it.

Your memory of what was is shaped largely by what is.

If you focus too narrowly on the task at hand, you may never use your peripheral vision.

Chance favors the prepared mind.

[danielreport]

Conversation: Niall Ferguson & Peter Thiel