• Alex Hormozi On Finding A Profitable Market

    The content that follows was derived from a video by Alex Hormozi. It’s another holdover from a now defunct website I had. I have mixed opinions of Alex Hormozi, if only because some of the life advice he gives is wildly incomplete and is yet presented with bravado…par for the course when you’re building a brand/cult of personality on the internet, I guess. So I should probably just say I have mixed feelings about advice on the internet (duh); I know the real-life Hormozi would let more subtlety in the room.

    Anyway, the advice below is simple, but simple things are often the most important, especially for “wantrepreneurs” sniffing out ideas.

    I do recommend Alex’s book, by the way.

    When starting a business and selling a product or service, how do you know you have a good market?

    That is, what are the things you should be looking for to know you have a market worth going after?

    The First Rule Of Thumb

    As a rule of thumb, you should ask yourself: as long as a given market is not dying, and is stable or growing, then where can you provide the most value given your skill set?

    If you have experience working with people within a specific marketplace, or have some inherent advantage there – especially by way of first-hand, personal experience – go after that market first, because you know the pains people/companies in that market have, and you will ultimately create a better product that will provide more value.

    But – as might be the case if you’re reading this guide – many people have no experience in any market.

    So, then, here are the four things that you should look for which deciding upon a market to target.

    The Four Things To Look For In A Market

    1. Pain

    Is the market in pain?

    That is, does the market have a desperate need for your product or service? A “nice to have” is not something that people are going to take their money out for and buy, especially in a bad economic environment.

    Some things are timeless. Health, wealth, and relationships are the timeless needs of humanity. Are people sad and lonely (relationships)? Are people broke (wealth)? Are they feeling bad about how they look, and are they unhealthy (health)? These are three big areas of pain.

    When looking at a potential market, should ask: is there key pain that you are solving?

    2. Growth

    Is the market growing? This one is pretty simple.

    A newspaper company isn’t going to be doing well when the market for newspapers is shrinking.

    You want the market you enter to be growing.

    3. Easy to Find

    Are your prospects easy to find?

    If you’re marketing your product and cannot find your prospective customers to begin with, then you’re not going to be able to sell your product or service.

    For example, if you’re marketing to plastic surgeons and the only people seeing your ads are nurses, then you’re not even going to be able to present your offer to plastic surgeons, let alone sell anything to them.

    When picking a market, you want to find one that you can target easily, that has associations/groups/channels that people in the market congregate around. This way you can cast your line there, and then hook clients.

    If you can’t find your customers and clients, they’ll never find you.

    4. Purchasing Power

    Do your potential customers have the money to spend?

    In order to be successful in a market, your potential customers need to have purchasing power, plain and simple.

    As an example of where there might not be purchasing power: if you’re going after unemployed people to coach them on how to compose their resumes presents a growing market with a lot of pain, and the customers are super easy to find, but these people probably won’t want to buy your stuff, because they don’t have jobs.

    An Example Of This Framework In Use

    Let’s take a quick look at how this four-part framework for a profitable market looks when applied.

    Let’s say you are a relationship coach – you serve couples, and you’re good at helping people find love. You want to find a market that has all four of the attributes above. This means that instead of saying you’re going to help say, college kids find love, you would probably after seniors in their second half of life who would like to find their next partner.

    Senior citizens looking for their next partner check the boxes of our framework.

    1. Seniors have tons of pain because they’re alone.
    2. Senior citizens present a growing market because people are dying and getting older every day.
    3. Senior citizens are easy to find.
    4. And senior citizens in general have far more money to spend than say, college students.

    So, even though you have the same core value proposition when going after senior citizens as opposed to college kids, you’re choosing to serve a market that will probably make you much more money.


    When looking for a market, ask which market, above all else, you can provide the most value to. If you have personal experience in a market, that’s going to trump all else.

    If you don’t have personal experience in a market and just have a skill (of being able to market or sell, for example), then look at your market in terms of the four attributes covered above.

    You cannot have only three of the four attributes above. If you’re missing one, it kills the framework.

    You can find a market that has tons of pain, purchasing power, and that’s easy to find, but that means little if the market is shrinking every year.

    In the example of going after unemployed people as a market: they were growing as a market, in pain, easy to find, but didn’t have the purchasing power.

    If you have a product for plastic surgeons but cannot find them and target them with ads, you won’t do well.

    If your product is simply “nice to have” but people don’t truly need it, then not enough of them are going to buy it.

    You want to make sure that your market has all four of the covered attributes. And ideally, you pick a market that you already know you can provide value to, and solve a problem within that meets all of the four criteria.

  • Blogs

    A working list of blogs (and some more traditional websites) I sometimes read, either to learn or find food for thought.

    I will add descriptions to these, and some of what’s here might end up outdated and defunct – but take this, for now, for your clicking pleasure.

  • Jay Hoovy’s Clever Outreach Strategies

    A short post I had written up for a now defunct website. Just some fun little strategies I came across while watching a video by Jay Hoovy. I tend to stay off of the Big4–MBB-PE-BSchool-to-Startup-Pipeline-Wunderkind side of YouTube, if only because it stings on account of my life getting absolutely mangled and not even asymptotically approaching that path let alone pulling onto it…but, you know, I dabble…or the algorithm gets me once in a while. These might actually be useful if you’re in PE, an entrepreneur looking for ways to “surprise and delight,” or someone who can otherwise afford to step outside the bounds of networking and cold-calling proper.

    Hungry For Deal-Flow

    Jay Hoovy is a startup founder who did stints in investment banking and private equity.

    As a hungry junior associate in private equity, he was eager to source a deal. He would fill his morning drives with exhaustive cold-calling, and on one occasion even showed up to a company’s headquarters – a on a whim, and after being certified in the software produced by the company – and secured a meeting after his firm had failed to do so for over a decade.

    In a video about his private equity “war stories,” Jay shares a couple of creative, fun strategies for outreach that he used while taking as many shots as possible in contacting companies.

    Here they are.

    1. Papa John’s, But Brand It

    One strategy Jay used was finding the Papa John’s that was local to a given company, ordering a pizza to the company under the CEO’s name, but ordering a pepperoni pizza, requesting that the pepperoni was arranged so as to form the letters/initials of the private equity firm he worked for.

    He would then send an e-mail to the company saying something like, “hope you enjoyed the pizza – would love to take you out for one in person some time.” This got him a number of good leads.

    Might just send a pizza with my name on it your way…

    2. Venmo A Founder/CEO Your “Two-Cents”

    Jay would find the Venmo account for a founder or CEO of a company and send them $0.02 with a message along the lines of, “Hey [person’s name]! Would love to share my two cents on your business and how we might be able to help grow it!”

    Using Creative Approaches To Outreach

    Clearly, these strategies aren’t exclusive to private equity. We live in a terribly noisy world, with all kinds of people competing for attention. If there’s someone you want to get in touch with, try to get a little creative, or to put it another way, “surprise and delight.” You never know how far a thoughtful gesture can go.

  • Errolson Hugh On Asymmetric Design

    These notes were derived from a video featuring a presentation by and interview with Errolson Hugh. You can find this video, produced by Race Service as part of their RS Night School series, here.

    Errolson Hugh is the co-founder of Acronym, an innovative clothing brand and design agency. Acronym’s garments are highly sought after, and focus on functionality, quality, and cutting-edge materials. As a company, Acronym takes an unorthodox approach, resisting norms of both industry and consumption, and does so successfully.

    Hugh offers his framework for asymmetric design, used by his company to great effect. This framework arguably applies to any setting wherein there are inequalities between competitors.

    Asymmetric Design: A Primer

    Asymmetric design is a term Errolson uses to refer to asymmetry in a competitive situation. It concerns a smaller, irregular force fighting a larger, regular force, as can be the case in a given industry, e.g. the fashion/garment industry in which Acronym operates.

    When you trying to break new ground in an industry, it is not a fair fight; the playing field is not level. Entrenched systems exist, and incumbents don’t want anything to do with new ideas because the status quo is what is profitable for them. If a competitor begins to win, they begin to lose, and so it’s in their best interest to prevent said competitor’s progress.

    Asymmetric design as Errolson and his team at Acronym see it is a toolset to balance out some of these inequalities.

    “Very simply, when you’re in a competitive situation and you’re fighting against an opponent that’s larger than you are [even if you have equal skill], you have to be smarter, faster, meaner. There’s absolutely no other way around it.”

    Acronym took ideas from active sportswear, military, and industrial clothing and sought to apply the technologies to garments meant for everyday, civilian use. This was a radical idea when Acronym was founded, and was greeted by much skepticism. Errolson says that while Acronym started in good faith, they had no idea how difficult it was actually going to be. They quickly realized “the hard way” that it is necessary to go outside the system as-is.

    Asymmetric design is a way to go outside of the system, and is designed to work when you’re not in a fair fight.

    First Win, Then Fight

    “First win, then fight,” is Errolson’s four-word, simplified summation of the book The Art of War by Sun Tsu.

    The book, “…tells you to forget the usual notions you have about conflicts”, i.e. that in a conflict you have two opponents and you slug it out. Instead, the idea is defeat the opponent before you even fight. In the best case, you don’t fight at all.

    In asymmetric design, the idea is to start by finding the unfair advantage. Battles should also be chosen carefully. Ultimately, “if you can’t win, don’t play.”

    The Enemy’s Sword Is Also Your Sword

    This concept concerns two things:

    1. Efficiency
    2. Mastery


    It is impossible to find an unfair advantage, and thereby be efficient in your strategy if you don’t know your enemy. Only by knowing your enemy can you really understand how to defeat them.

    A necessary pre-condition for efficiency is mastery. You can deduce everything about your competitor via mastery.  A competitor’s ethos, business structure, and design methodology are encoded (in the case of apparel design) into the garment. A person who has mastery in apparel design can take a jacket off of a shelf and understand how the competitor arrived at that product, and figure out what their own advantages are over that competitor, what it is that the competitor can and cannot do.

    Acronym is concerned with “the meta-narrative, which is all of the things that went into the making of the story”. These things are visible in the product, too. Acronym is also concerned with post-market narrative: when a customer comes back with a garment that has worn down from use, requesting that it be repaired, they will sometimes simply try to replace that garment so that they can study the older one, see where and why a given pattern or fabric wore down, gain data, and improve in the future. This type of narrative is encoded into a product, too.


    Mastery allows you to gain every unfair advantage you can get. You can even leverage your competitor’s resources against them and effectively let them do part of the work for you.

    Errolson gives the example of meeting Yohji Yamamoto at a dinner, in very dim lighting, and describes the way that Yamamoto reached out, touched his jacket, and said, “Japanese”. Yamamoto was able to correctly discern the origin of the fabric by simply feeling it for a moment.

    Errolson references The Book of Five Rings by Miyamoto Musashi, which contains the concept of the two-fold gauge of perception & sight. This again relates to the idea of not only seeing what’s in front of you, but knowing what the presence of what’s in front of you entails, and implies.

    When Errolson talks to younger designers, he tells them not to look at the design as a mere end product, but “as an artifact of the process that created it.” If he looks at mood boards students have built from images on tumblr, etc., he can tell which images influenced their designs, which isn’t necessarily a good thing. This, he says, “doesn’t really bring us any further. Don’t look at tumblr, look through it…what was the person thinking about when they made the garment that’s in [the image]. that’s the interesting part”.

    Your Own Game

    “The way to gain the unfair advantage is to play your own game. Playing someone else’s game brings no advantage whatsoever…there’s a reason the saying ‘the house always wins’ is a thing.”

    Errolson says that to win in an unfair situation, you have to do what only you can do. He says that if you’re actually going to bring value to society, your craft, your consumer, you have to make sure that your influences don’t define your design more than what originality you’re bringing yourself: “Good design gives more than it takes” (he attributes this quote to Eric Hu).

    Looking at design, and understanding how something is made – using the enemy’s sword, so to speak – is about efficiency. One of the most efficient ways to do things, especially when learning, is to copy, but this is dangerous because it doesn’t give more than it takes. It only takes. What you want to copy, really, is the process, not the result. You should seek to reverse engineer the process that resulted in a given product, and ask questions about how that product was arrived at. If this is done while in one’s own situation, according to one’s own goals, something different will result. If this is done effectively, you will end up with your own message, and end up playing your own game.

    Strike From The Void

    Striking from the void means applying the concept of ‘playing your own game’ to your entire operation. It means to not seek validation. In both your product design and business practices, you should do only what you can do on a company level, do only what you can do on a materials level, and so on.

    When designing garments, Errolson and his team look at a given material and ask, “what can this material do, and what can only this material do?” They try to express this, and it leads to things that are unique. Asking these questions can also help determine fitness-to-purpose.

    Equally as important as playing your own game is not being tempted to play other people’s games. Once you’ve chosen your path and moving along it, there are always going to be distractions, people questioning what you’re doing. There is perhaps more power in saying ‘no’ than in saying yes. In the case of Acronym, Errolson says that, “we say no probably nine out of ten times, to almost everything that people ask us. It’s taken us a long time to realize that if we play the game everyone else plays, we always lose. We’re smaller…our competition is hundreds of times, if not thousands of times larger. They have more resources on every front…but other companies still can’t do what we do, they can’t replicate it, because they’re copying the result, they’re not copying the process.”

    Errolson says that to avoid falling into playing someone else’s game, it’s important to focus on “your own methodology, your own system, your own path.” He offers an anecdote about meeting the head designer at McClaren, who told him that the car designers are always trying to convince the engineers to do certain things; the engineers, in response, basically say, if it doesn’t make the car go faster, take it off. In other words, if whatever you’re doing – whether making a design decision, a management decision, or otherwise – doesn’t serve your game and unique purpose, get rid of it, even (or especially) if everyone else does it. Don’t be afraid to take the risk in doing what might seem counterintuitive to everyone else. All of the things Errolson and his team do at Acronym that work best are things that, when explained to people in the industry, are treated as crazy, unfeasible.

    Measure Twice, Cut Once

    You want to be able to perform and deliver in your category in a way that is above and beyond what everyone else is doing: “while everyone else is playing (A) game, you come with (B) game and just short circuit everything they’re working on.” Errolson points out that the number one selling camera is the iPhone. How can anyone compete with it? They can’t. Apple changed the paradigm. This kind of unorthodox methodology that is outside the norm can deliver long term, defendable success.

    (Errolson gives a demonstration of an Acronym jacket that has feature sunlike anything else. There is a sleeve pocket in which to store a phone, which connects to an interior opening such that with the wave of an arm, the phone will slide into the wearer’s hand from inside the sleeve; The zipper on the jacket, when completely closed/zipped up, can be undone rapidly, and opened all at once with a pull upwards on the zipper; Built onto the jacket is a strap which allows the wearer to remove the jacket, and then sling it across their body via the strap, and also tighten the strap to fit the torso. The jacket is then off, out of the way, and secured comfortably.)

    New Futures

    Asymmetric design can have value outside of fashion/clothing because in Errolson’s words, “…all bets are off. The situation that we’re in globally, we need new futures. Business as usual is not delivering what we need. In the era of post-truth and environmental collapse…everyone is an amateur. The way things have been made up until now doesn’t apply.”

    Errolson says that to affect systemic change, new methodologies are needed. And these new methodologies “are going to be going up against entrenched systems. And we all need all the help we can get.”

    Quick Interview Highlights

    • Born in 1971
    • Grew up in Vancouver, Winnipeg, and Edmonton
    • Started martial arts at 10 years old
    • Realized he could do things in his karate uniform that he could not do in his regular clothes. This motivated him to have clothes he could move in as he did in his karate uniform.
    • Went to Ryerson University in Toronto. Was in the Fashion Design program.
    • Moved to Munich with his co-founder Michaela. Started a design practice. Designed everything from swimwear to snowboard collections.
    • Acronym was founded in 1999, born out of frustration with the way design would take a backseat in the commercial requests clients had.
    • The first Acronym product was launched in 2002: a boxed set of a jacket and bag
    • In the beginning, a large part of Acronym’s customer base was made up of other designers
    • In 2008-2009, Stone Island and Arc’teryx had reached out to partner with Acronym
    • Collaborations with Nike, both on footwear and on their ACG line helped change the profile and popularity of the brand.
    • Acronym doesn’t have a sales director, or merchandizing lead – they simply make what they want to, and make the best versions they possibly can. But because of this their products are very expensive.
    • Errolson sees the theme of his work as one of resistance against norms of industry, consumption, and expectations around product design & function.
    • For 8-10 years, Acronym was only two people: Errolson and his partner Michaela.
    • Errolson sees Acronym as the opposite of fast-fashion. He’s even said that “not buying Acronym is more Acronym than buying Acronym”.
    • Acronym tells its retailers that they are not allowed to mark the product down. The idea is that because their products are simply iterated upon, and not entirely new products, they don’t lose value over the course of six months, or whatever time period. The garments are just as good and maintain value.
    • Errolson sees Acronym’s items not as something people should be buying every season as is the trend in so much of fashion, but as a product whereby you should “buy one and then keep it for ten years.”
    • “The average number of times a piece of apparel is worn is 7…this is insane, this is literally destroying the planet”
    • The apparel industry is the biggest employer in the world, but because of this, it also has the least oversight. The likelihood of slavery in the supply chain is higher than in any other industry. Fast-fashion’s race to the bottom regarding price exasperates all of these problems.
    • “Fast fashion must die.”
  • Edward O. Thorp On Beating Blackjack, Roulette, And The Stock Market

    These are notes taken from Tim Ferriss’s interview of Ed Thorpe – mathematician, father of card-counting, hedge fund manager, and shining example of human health. I watched this interview for entertainment more than anything, as I quite admire Thorpe and enjoy listening to him speak. If you want the full breadth of his story, I recommend his books.

    Growing Up & Education

    • Born in Chicago during the ‘reign’ of Herbert Hoover
    • Has seen 16 presidents(!)
    • Moved to CA with parents during WWII
    • Grew up in CA
    • Went to UC Berkeley and UCLA. Got BS and MS in Physics.
    • During PhD, took more math, figured out he could graduate more rapidly in math, so got PhD in that.
    • Taught at UCLA, MIT, New Mexico State University, and UC Irvine

    Blackjack, Claude Shannon

    • Got interested in beating blackjack while teaching at UCLA. Someone told him about an article that would let him play almost even. In 1958 went with wife to Las Vegas – never gambled because knew odds were against you – and bet $10 and played for 40 minutes. Had a card with a set of rules for hitting, standing, doubling-down, and pair-splitting; was the best way to play against a full deck or what was left of a randomly shuffled deck if you didn’t know anything more about the cards that had been used up. Made some remarkable plays; in one play he got a seven-card 21. Realized people didn’t know much about the game. Realized he could devise a system to beat the game.
    • Moved from UCLA to MIT and had access to their “big computers” (IBM 704). Taught himself how to program and realized he had a winning system. Wanted to get his system published so that people wouldn’t claim credit (happened to him a couple of times in mathematics). Claude Shannon was on campus and was a member of the National Academy of Sciences; looked him up, got to meet him for five minutes, Shannon changed title of Thorp’s paper to make it look less like a “gambling paper.” Initially rejected the abstract, but he knew someone on the abstract committee (John Selfridge; became quite well known in number theory) who supported him. Pamphlet was picked up by Tom Wolfe, who wrote piece for AP (was a journalist/reporter at the time), and it got massive press.
    • Thorp went out and tested his theory (thought he should do so if he was going to write a book) and made about $11,000 in about 20 hours of play (equates to something like $110,000 today). Starting bankroll was $10,000. Made $11,000 on top of that, which is what he prediction of what would happen was.
    • His contribution to strategy was to figure out what would happen when some of the cards were missing from the deck – the cards that have been used up are not a representative sample of the cards in the deck. They can vary quite erratically, e.g. you can use up the Aces early, and that would be bad for the player. Or you could use none of them until late in the game, which would be quite good for the player.


    • Was working on a way of beating roulette – shared this fact with Claude Shannon, who was “king of gadgeteers”. He built robots that would run mazes, machines that would play chess…had hundreds of thousands of dollars worth (in 1958, 1959 money) of gadgets in his house. Their initial five minute meeting turned into hours – they decided to build a machine that would help them predict the outcome of a roulette game.
    • Built a small computer that had 11 or 12 transistors in it (can’t remember because they had two versions). It’s in the MIT museum now. Worked in Shannon’s basement almost full time over nine or ten months to build a wearable computer (the first wearable computer according to the MIT Media Lab). Person would wear the computer and enter push-button information about the position and velocity of the ball and the rotating wheel in the center. The computer would instantly tell you where to bet. The other person would sit at the roulette table, apparently not connected to the observer who was putting in the roulette information; that person would hear a series of musical tones. When the musical tones stopped, the last tone in the octave would tell them what section of the wheel to bet on (dividing the wheel into eight sections with a little bit of overlap). The person betting would be able to quickly put money down on five neighboring numbers on the wheel. Had a massive edge of 44%. The computer worked “wonderfully well.”

    Health & Fitness

    • Wandered into health and fitness by accident (“just like I wandered into blackjack and roulette…I’m curious and always looking for things to understand, and I like the idea of self-improvement, too”). Heard a bunch of clanking when he was walking behind the student co-op when he was about 20. Said it was “a waste of time, this is ridiculous”; one of the “fairly burly guys” lifting bet him that if he worked out with them for a year, one hour and evening, three evenings a week, he would double his strength, “and I said I don’t believe it, let’s try it.” Exercises were a barbell squat, military overhead press, bench press, and [forgot the second]. He was maybe 150lbs, and by the end of the year, he could military press 185, he could bench press 375, he could do 15 reps at 325, he could squat for sets at 375. He was “astounded that this all came to pass.”
    • He got into swimming because he was interested in scuba diving.
    • One day in his 30s (at 35) he was jogging along the beach with his brother-in-law and was gasping for breath. Read a book by Ken Cooper who in a large part started the aerobics revolution that swept the country. He started keeping track via Cooper’s points system. He started trying to run a mile a day – started with running with one every saturday. Built up and tried a ten-mile race; finished, did reasonably well. Decided to then try a marathon. Did that for about twenty years until he hurt his back weightlifting (herniated a disc). Said marathons gave him a very good base.
    • Now walks three miles three or four times a week, and spends about two days in the gym doing stretching, strength exercises, with a lot of exercises on core strength. Tries to listen to his body, do what he enjoys; “some is better than none, more (up to a point) is better than less.” Was probably in his best shape around 55-65 years of age. Did race walking for a while; lower impact than running but you can get the same kind of aerobic workout.
    • As he gets older, he gets weaker, and it gets harder to do things, gets a little tired; now does squats, usually not just body weight, or dumbbell squats, or lunges with an emphasis on one leg, then the other; will do pull-ups (most he’s done as of late, speaking at at 89 is four underhand pull-ups, two overhand pull-ups); does a lot of back exercises regularly “on the mat”, which is very helpful for “keeping your back in shape and keeping my core in pretty good condition.”

    Getting Into Investing, Starting A Hedge Fund

    • Made money from blackjack and book royalties, and it was the first time he had any spare money. Wanted to figure out what to do with it. Investing made sense to him. Started out by making “a lot of foolish beginner mistakes,” until he decided to “sit down and figure this thing out.” Spent the summer of 1964 (the third year he was New Mexico State University) in Martindale’s, a book store in Beverly Hills, reading about investing. Then in the summer of 1965 he did the same, read anything he could find, and got a book on common stock purchase warrants, which were the forerunner to what people call call options now. Realized he could mathematicize them figure out how to value them and by doing so would be “probably be ahead of the crowd who didn’t know how to do these things,” and would probably have an edge.
    • Went to UC Irvine when it opened in the fall of 1965, and was telling one of the deans about his idea; the dean mentioned that they had someone else doing that, who was Sheen Kassouf. Kassouf had already made an elementary model for trying to judge warrants. They decided to write a book together and work out more of the details in theory – this became Beat the Market.
    • Thorp began to do warrant hedges, whereby you buy a cheap warrant, and you short common stock against it; or, you short an overpriced warrant and you buy the common stock against it (they tend to move together). In the case of the overpriced warrant, as it collapses toward zero or its conversion value, you capture an excess return. He found that you could make a steady 25% a year with practically no risk by doing this.
    • Was doing this for himself, and then word spread, and people wanted to sign up; signed up the dean of the graduate division, and the secretary to the chancellor, and some people in the math department. So he was managing a collection of little accounts for people, who were making 25% a year. The dean of the graduate division happened to also be an investor with Warren Buffett. Warren Buffett was shutting down his partnership in 1968, and the dean of the graduate division wanted to know where to move his money to so he introduced Thorp to Buffet; they got along well and the dean gave Thorp his money to invest. Got to know Warren Buffett and was sad to see Buffett going out of business because, as he told his wife at the time, he thought Buffett was “going to be the richest man in the world.”
    • Got the idea of forming a hedge fund from Warren Buffett who was just closing down his hedge fund. Went into business managing the aforementioned accounts, then merged the accounts into what was a hedge fund or private limited partnership. That ran for about twenty years using ideas he kept generating – mathematical finance ideas to stay ahead of other investors and keep making excess returns. In twenty years they only had three down months, and those down months were less than 1% (so they basically just printed money every month). It made just under 20% annualized during that time. It ran with extremely low risk (Thorp describes himself as very risk averse), yet had very high return.

    (Thorp), Black, Scholes

    • Thorp figured out the Black-Scholes model in the middle of 1967, and decided he would just use it for himself, and then later kept it quiet for his own investors so he could make everyone a lot of money out of it.
    • Fisher Black and Myron Scholes read Beat the Market, and they saw how to improve the ideas in the book. They made a mathematical finance model that valued warrants and options very accurately. It was based on a set of assumptions that are “fairly narrow but pretty good.”
    • Thorpe thought he was the only one who had this model, so when the Chicago Board Options Exchange opened in 1973, he thought he’d have the field to himself. But, unfortunately, Black and Scholes published the idea, and did a better job with the model because they had very tight mathematics behind their derivation. Thorp had to make a couple of (reasonable) assumptions to get to the same point – assumptions that turned out to stand up in practice and in theory later on.
    • Despite the model being published, people didn’t catch on right away. so when the CBOE opened for business in April 1973, the only people on the floor were Thorp’s traders – “it was like having machine guns against bows and arrows.”
    • Scholes went on to win the Nobel Prize in economics in 1977 (Black would have too but died of cancer.)
    • Robert C. Merton was at MIT and wrote “some beautiful papers about this theory,” at about the same time as Black and Scholes were doing their work, so the Nobel was awarded jointly to Scholes and Merton.
    • Thorp says that the people who don’t publish don’t get the prize, no matter what they’ve figured out, and they don’t really deserve to, as “you haven’t proven to the world that you really did this…and you haven’t really changed the world in the same way that people who published do…the who don’t publish don’t have claims to these prizes.”
    • Having the tool in place turned out to be revolutionary for his life, and he had some shortcuts in using it that other people didn’t have for a very long time because he developed it himself, and people didn’t get around to seeing it the way he saw it. His hedge fund stayed ahead of “the marching legions of PhDs” until the time of closing the partnership in 1988.

    Warren Buffett, Berkshire Hathaway

    • When he had met Warren Buffett, he thought Buffett would one day be the richest man in the world because he “was compounding at a high rate of return, that he’d been doing it for a long time, he was very very smart, and he really knew a tremendous amount about companies. So he was a good evaluator of companies…And he demonstrated a very large edge already. – he’d been running his partnerships from about 1956 to 1968 and had about a 30% before fee annualized return rate.” Thorp was sorry Buffett was going out of business and that things looked so bleak from the standpoint of stock prices at that time.
    • Buffett decided at that time to make a poor textile company in New England – called Berkshire Hathaway – his own little private mutual fund. He bought up as many shares as he could. He didn’t particularly encourage his exiting partners to take shares because he wanted them for himself; they did have an option though, as they could take cash or take shares in Berkshire Hathaway. Not knowing what to do, many of them took cash and exited. Some of them took Berkshire, though, which would have been at something like $12 a share in 1964, and in 2023 was just under $500,000 a share.
    • Thorp knew how smart Buffett was, and thought he would be the richest man in the world, but that it would just take time. Lost track of him, figuring he was just working for his own account with no opportunity for an investor. But in 1982 saw an article about Berkshire Hathaway, saw he was running it, and decided to take a look – saw that it had gone from $12 to $982. Many people sold on the way up. Thorp knew what Buffett was doing, so he decided to buy at $982.

    Investing Advice

    • Thorpe would tell students in an investing class that the answer is really easy for almost everybody, but “you’re not going to believe me until you work through it yourself and understand it.” The answer, to start with, is: if you’re a long-term investor, you should just buy and hold equities. The best place to have bought and held equities for the last couple of hundred years has been the U.S. overall. Equities here have compounded at about 10-10.5% for two-hundred years. The data for the first hundred years is not as good as the data for the last hundred, but the data for the last hundred is quite good, and very well documented. You can prove by logical, mathematical arguments that if a person simply buys the index and holds it, he will outperform most of the other players. The ones who don’t do that pay trading costs, more volatility from lack of diversification generally, and they often pay investment advisors, and pay taxes when they trade.
    • What if someone asks, though, why can’t I do better? The academics have something called the efficient market theory which claims that you can’t do better. That’s wrong – you can find instances where you can do better. But the kind of work you have to put in to do much better is substantial. You end up spending a substantial amount of time and energy figuring out how to do it better. People who aren’t buying the index are doing a little bit worse – they are themselves as a group are like the index. The people who aren’t buying the index, but who are like the index as a group are paying all of these aforementioned costs. On average, that group does worse. It’s only a small collection of people who do better.
    • On the other side of the coin, if you really are interested in investing, it’s worth educating yourself and trying to do it, because you will learn a lot about investing, you might actually find a way to win, and you’ll learn a lot about how the world works and a lot about life, too. The things you learn from what seems like a narrow, specialized field generalizes very widely.

    Transferrable Lessons

    • You learn about investment risk and how you want to avoid very great risks, or minimize them, because they can take you out of the game altogether. Some things like cryptocurrency are highly volatile, so you have a chance of a very large gain, but also of a very large loss. If you lose all of your capital, it’s very hard to climb back out. If you lose 90% of your capital, you have to multiply what’s left by 10 in order to get back to even, i.e. you have to make 900% to offset that loss. So you want to avoid really bad outcomes.
    • He applied this to COVID, to what to do and how to deal with it. The stats in early 2020 showed that males 85 and up were dying at the rate of 18%. So he considered this a risk that could “take him out of the game” with fairly high probability. So he decided to mask up, avoid crowds, and think about the risks of various activities and decide whether it’s worth it.

    Long-Term And Intermediate-Term Thinking

    • Thorp tends to be a long-term thinker, even at 89.
    • If you’re looking at 15 or 20 years or more, the best investment is to buy entirely equities and hold it. Buffett recommends 90% index and 10% intermediate-term bonds for cash.
    • If you have a shorter time horizon, may want to do things differently. It depends on how much you’re going to need, and how much you have.
    • He has a set of rules that are helpful when thinking long term:
      • The 4% rule – suppose that you’re going to retire, and you want enough to last you from your capital throughout the rest of your life. A pretty good working rule is to put most of it in equities, and spend 4% of your capital each year (or less) if you can, and that ought to last you from say your 60s to the end of your life.
      • The 2% rule – if you only drain 2% out per year, then that money will probably grow in perpetuity. There’s a small chance it will be extinguished by really bad downturns, but very small.
    • For intermediate-term thinking, say 5 to 15 or 20 years, the 4% rule might be good.
    • For short-term, it depends on what your needs are, and what you’re going to have to come up with. People are in various ranges of wealth. There’s what you might call poor, in which case you don’t have very much to save, and it’s going to be hard to retire and “hard to make it.” Then there are middle class people who can put a moderate amount away. He knows someone in her mid-fifties who has saved about 1.5 million, and he thinks “she’ll be fine”; he explained to her to “pile it all in equities and let it rip.”
    • A lot of people are “scared rabbits.” Market goes up and they get confident and start buying, then it drops and they get out, and so on. “You won’t hold fast to something unless you understand it yourself.”

    McKinsey, Bernie Madoff, Thinking For Yourself

    • In 1991 was invited to review the portfolio of McKinsey & Co.. What they had was “really quite good, but there was one very strange investment they had – it printed out one or two-percent a month every month…they had a record going back into the late-60s, supposedly.” He asked how they did this, and McKinsey said they didn’t know, that (that is, the entity getting them this one or two percent) wouldn’t explain their method, but that they could show Thorp their accounts. He looked at their accounts and saw that the account bought stock, and put option positions on collars – they had a put option a little below the stock price, and bought a call option a little bit above, and the two things paid for themselves, it was self-financing. So they apparently didn’t have a whole lot of risk. Thorp could show that in a downmarket they would lose in a down month, and that in an up month they would win; but they won every month. The reason they won every month is because a “mysterious trade” was put on involving S&P index options, and it was always in the right direction – so if they were going to lose, it would be a winner, and if they were going to win, it would be a loser. Thorp said “this is not possible.” McKinsey called the person in charge, who at that time was Peter Madoff, brother of Bernie Madoff. Peter Madoff refused to let him in if were to show up. Thorp looked at all of their trades and saw that half the trades never happened – no trades occurred on any exchanges at the prices they made them at. Another quarter of the trades had so much volume that it couldn’t have happened because there wasn’t that much volume on the exchanges where they traded. The last quarter of the trades didn’t happen anywhere. He then decided to look at “some of the trades that could have happened.” He went to a vice president of Bear Stearns and asked him a favor: “I’m going to give you ten options trades. I’d like to know who was on the other side of these trades. In particular, was Madoff and company on the other side of any of them?” They came back and said no, they couldn’t find any traces of Madoff and company. Thorp told McKinsey it was a fraud. He told them to exit, and they did in two months.
    • Both McKinsey and Thorp started inquiring within their networks to see who had investments with Madoff. They were able to identify about half a billion – how much more was out there, they couldn’t say, but things “were looking very bad.” Madoff had thousands of investors, so people assumed it had to be all right. When Thorp was looking into McKinsey’s portfolio, the person who invited him to do so – a hedge fund manager himself – believed in Madoff, and continued to go out and raise money for him. In 2008 when the news about Madoff came out, the man had been raising money the same week that the bad news came out, and had his personal money, family’s money, and trust fund with Madoff. Point being, Thorp gave him all the information, explained it clearly, but the guy did not believe it, eve having been successful in his own right (he came from a rich family that made a lot of money in the 30s, and he would poll people, and go by the poll; he let the crowd think for him).
    • “That is a fundamental mistake that many people make – they let the crowd do their thinking. They don’t figure it out for themselves.”

    Mental Models

    • Externalities: simplistically, an externality is a consequence that’s of somebody’s action that’s generally not intended, and it’s usually bad, but it’s sometimes good.
      • An example of a bad one is when Thorp goes out to get into his car and finds that a tired is flat; he finds a sheet metal screw in the sidewall, which means the tire is going to have to be replaced. Where did the problem come from? Down the road there has been a lot of construction going on, and when Thorp goes for walks he notices there’s a lot of metal – sheet metal screws, nails, etc. – in the street. This is an unintended bad consequence of the work going on. Who benefits? The homeowner does because he doesn’t have to police his workers and spend extra money on street sweeping labor. But it costs Thorp $500 (for a 10.5″ wide Michelin tire for his Tesla Plaid). So this is an unintended bad consequence for Thorp that saves a very small amount for the homeowner doing the construction.
      • Another example is when Thorp was a chemistry student at age 14 in 1936 and came across someone named Svante Arrhenius, a great Swedish chemist from the latter part of the 19th Century. He at that time (and Thorp learned this in 1936) did a study of how gases in the atmosphere trap heat. He explained how much the heat-trapping power was of various gases, including carbon dioxide, would contribute to global warming as it increased. “The mechanism is obvious – you can sit behind a plate glass window and feel everything heat up, the greenhouse effect.” Now people create a negative externality by polluting – people drive around in cars and dump C02 into the atmosphere; each individual is convenienced by being able to drive around in their car, but is contributing a major externality to the world.
    • The Tragedy Of The Commons (Garrett Hardin): The simple example is you’ve got a simple village with a little green in the middle, and it’s got a lot of grass growing; one guy has sheep and he lets them graze on the green and it’s not a problem; a few more people move in, they get some sheep, they turn them lose on the green; pretty soon there are too many sheep for the green – it’s all eaten up. Each person acts in their own self interest, but collectively what they do is against the common good.
    • There’s a collection of cognitive biases published by Inc., from Elon Musk: https://www.inc.com/jessica-stillman/elon-musk-cognitive-biases.html
    • Charlie Munger‘s book, Poor Charlie’s Almanack, also has many models for thought embedded in it.
    • One of Thorp’s favorite models is Fundamental Attribution Error. What it says is that there’s a human tendency to make assumptions that are not fully justified by the evidence. For example, you go to lunch, and the person you invited doesn’t show up. So you think, maybe he forgot, because he’s a forgetful guy; or maybe since we had a quarrel two weeks ago, maybe he’s mad and he’s going to show me. You start making things up to try to explain it, but you don’t have the evidence for it. Turns out he had been in a car accident and had been dealing with the fallout from that.
    • Fundamental Attribution Error ties into Thinking Fast and Slow by Daniel Kahneman. In the book he says you’re in the forest, and you hear a roar. You don’t stop to find out where the roar is coming from – you run up the nearest tree; you react, you don’t take any chances. If it’s not a lion or something as threatening, you’ve made a fundamental attribution error, but it saved your life. And so it seems this is programmed into us, it’s evolutionary. If you think fast, emotionally from the gut, responding without really reflecting, you’ll make a lot of mistakes. But sometimes it’s a way of saving your life. For example, someone yells fire, and you run out the door before you find out whether there really is a fire.
    • There can be positive externalities too, like having fire insurance that ends up being beneficial to your neighbors.
    • If someone creates an externality that is negative, a good thing to do is to tax it, e.g. carbon tax. We’ve learned that if you tax something, you get less of it. A carbon tax is the rational, logical solution to the pollution problem. Make the tax big enough and people will find other ways to do things.
    • There is a difference between rational solutions for social problems and what you can actually accomplish politically. There is a book about this by a professor at Yale, Ian Shapiro, called The Wolf At The Door, which describes how to form coalitions that will win, and how to pass things that will stay in place, e.g. social security stayed in place because it had a strong constituency right away, and that constituency was going to defend it forever after. Shapiro believes you can make incremental progress by putting coalitions together in the right way.
    • Thorp believes we’re in a crisis of democracy, and that (simplistically) we have three paths: devolution (which Thorpe believes we’re undergoing now), evolution (the way by which things work out and we fix things), and revolution (things get ugly).
    • Ray Dalio‘s book (Principles for Dealing with the changing World Order) is worth reading, and is “a real contribution to thinking about the crisis we’re going through right now.” It discusses China as an empire, and the decline of the United States as an empire. “We can’t just sit back on our laurels and say we’ve been so great…and hope that it’s going to last…we have to do things differently.”

    Other Investors

    • There are people in the hedge fund world who have done remarkable jobs at times, but they’re not accessible to most people, e.g. Jim Simons/Renaissance Technologies. Renaissance has been extraordinarily successful, with probably the best risk-adjusted record from around 1989 or 1990 on.
    • “I’m trying to think of who I would give money to to invest…I don’t have anybody now that I’d give money to to invest. There are a few good hedge funds around, but they take too much for the general partner, and leave too little for the limited partner. And they also generate income that is highly taxed if you’re a taxable investor…so they’re only good for non-profits at this point.”
    • “I did give money to Ken Griffin‘s Citadel from the time it started…I think I was investor number one, after Frank Meyer who was the other general partner with Ken Griffin.”; “I had Ken Griffin around to the house when he was about 18 or 19 and just starting up with Frank…and we discussed at some length the idea of profits centers and subsidiary businesses, and I handed him boxes of prospectuses that were hard to get on all kinds of convertible securities.”
    • “Citadel was going to follow the exact plan that I was following when I shut down Princeton Newport, so that was good…They were doing what I would be doing had I stayed in business.”

    On Having Enough

    • “I was an academic, and I was curious, and I found things interesting, and I wasn’t really in investing to get rich…I just do things I like, and I don’t worry about money…’do what you love and the money will follow.’ Do what you love and the money may follow and if it does that’s fine and if it doesn’t, you’re still doing what you love. What’s important in life, I think, is the journey, and the people you know and you spend your time with, and how you spend your time otherwise also…that’s how I looked at things.”
    • “I started out as a child of the Great Depression, so I knew what it was like to have basically no money. I used to sleep four or five hours a night in high school, and get up at two or three in the morning and deliver newspapers. And I made twenty-five dollars a month…and I saved part of that for college, and invested part of it in science equipment…just because I like playing with those things and learning about them. So, my goal wasn’t to make money, it was to have a good life and enjoy myself and have fun. And it just so happened that it turned out a lot of money, too.”
    • “What I found though in the investment world is lots of people go in it for the money…it’s a validation of them, and they can’t stop…they end up with five or ten villas, a yacht, a jet…how much of your time are you going to spend in each house?…You don’t get to enjoy the important part of your life, which is time.”
    • “I wasn’t having fun anymore. It was turning into work….I decided to wind it down…When it became bureaucratic…and a grind where I had to do things I didn’t want to do, that was enough, it was time to go. And it was the same thing in academia.”
    • [After leaving investing] “I spent my time reading, traveling, exercising, enjoying my family and my friends, and learning. It’s also entertaining to casually managing my investments.”
    • “One thing that makes you independent is to accumulate capital, because then the capital can grow on it’s own if it’s simply invested as I described before in for example an index fund…If you have enough capital it will support you indefinitely.”

    What Ed Is Learning

    • Has focused on reading about what’s going on in American society. We can map out possibilities and ask ourselves, what will we do if some given scenario materializes? You could have, for example, an autocratic country. You could have a turbulent country where a large part of the country is badly upset and wants to bust everything up and start over some how. It’s worth thinking about what might happen and whether there’s anything any of us can do about it. “I don’t think there’s much an individual can do on a grand scale unless they happen to be in a position of great importance. But I think there’s a lot that an individual can do on a small scale, and I think the best thing we can do is teach everybody to think for themselves…so they don’t just take what they’re told in the press…or in the other forms of the media…and believe it. When you begin to think for yourself, the whole world changes, and becomes much clearer in my opinion.”

    Joseph Heller And Kurt Vonnegut

    • Heller died in the early 2000s, and Vonnegut was writing in the New Yorker about him and he said, “Joseph Heller and I were at a hedge fund mogul’s house…and I said to Joseph Heller, ‘you know, you’ve made a lot of money out of Catch 22. This guy makes more money in a day than you’re ever gonna make…Heller said, ‘you know what, I have something he’ll never have – I have enough.'”
  • Shy by Max Porter

    Note: These are the first book notes I’m writing, so bear with me. I don’t want to craft reviews per se…I never did enjoy book reports. So call this an impression. Or, just some notes.


    (I’m writing this some time after reading this book, so I may have to re-read, and then revise this post.)

    This book is important to me, in a large part because it showed me how a certain type of mental chaos can be captured with the written word, and how well it can work in terms of form, and something to be read by others. All of this made me feel a little less trapped in what I’ve experienced myself, and made me feel like I could one day get some of it into words, if I want to.

    I hope that you don’t relate to much of what’s in this book. But if you do, you might find it similarly…liberating? Comforting albeit in a kind of terrible way? Admittedly I found the book somewhat disturbing on account of being able to relate to some of what’s in it.

    All in all I recommend this book for both its style and content. I imagine your mileage may vary depending mainly on how much the character resonates with you…which feels like a lazy way to put it, but it is very much inner-life, inner-monologue, inner-turmoil focused.

    I don’t recommend this book if you might find topics of mental health, depression, or suicide triggering.

    I think this book was very well written. It was easy enough to read as well, despite subject matter (a lot of mental unrest) – I read it during a flight to Vegas. I do want to re-read it before long.


    I’ll include highlights I made here, but they’re not to be taken as quotes – just bits of language I wanted to save for one reason or another.

    • she tunnelled darker and more stubbornly into her melancholy
    • strange visions of herself as old
    • strangled manners
    • she has a sudden clear ambition for a neat and hurtful leaving
    • Eve fixating on a shocking scene, the body which would no longer be her problem
    • a gesture to the stupid cult of longevity
    • so she plans it, night after night, feels less alone when she’s plotting, waits for a full moon, stolen gardener’s rope coiled cinematic beneath the bed,
    • the floorboards complain, stone steps whisper her name
    • briskly bloody-minded
    • unrealistic soft and beautiful and picture-book charming, big and alive from above as if another person’s story has been slid or remembered into hers
    • Hello Eve, not tonight, not yet
    • talking about all the things she doesn’t want to miss in the next few years, the seventies, the music that’s coming, the love, the books, the freedom of movement beyond the body policed and ill-fitting, the widening of her life,
    • now she’s not dead she may as well run as fast as she can, wheeling around the pond, remembering for him,
    • noisy breath in her head, hammering heart life,
    • she’s left the rope in the tree, sinister joke, but that’s tomorrow’s worry
    • and he starts to scream, a fully unselfconscious cry, like a baby, pure wailing
    • It might be good for you to go somewhere and shout it out.
  • Mathematics Self-Study Resources

    A working collection of mathematics resources.

    Book links lead to Amazon (but none include an affiliate ID). Libgen, Z-Library, etc. might be your friends.

    Discrete Mathematics







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