Better To Be Lucky Than Good, Right?

Extremely successful people like to play humble and say they have been very lucky in so many aspects of life. But how much of the so-called luck is actually self-made and how much is a random occurrence, a destiny if you will?

Yes, there are people who hit the lottery. There are people who are born into rich families with well-read and well-connected parents and get the opportunity to get the best education, diet, and healthcare possible. This type of luck certainly plays an important role and can provide a significant head start in life. But how much of what is widely considered luck is actually self-made?

People who create more opportunities in their lives are likely to experience more luck.

Which behavior is likely to create more and better opportunities for you? Staying at home and waiting for something magical to somehow happen or going where the action is and meeting new interesting people?

Almost everyone has the option to go to a conference and meet people we admire and we would love to collaborate with, but very few arrive with an open mind.  How many forget about their ego for a second and make the first step to introduce themselves and create new professional relationships at that conference?

You can complain how hard the current job market in your profession is or you can write an email and suggest someone you admire five ways to improve their business and make money. You give before you ask. That’s how life works. In most cases, you don’t need to even ask for a favor back. When you give first, the people who you actually want to work with will provide back without you even asking.

Is it luck meeting a beautiful, smart girl who seems way out of your league and mustering the courage to ask her out?

Being at the right place at the right time can make all the difference in the world. I suspect that at some point in their lives, many people have been at the right place at the right time. But how many have actually noticed that opportunity and more importantly, were prepared to take advantage of it?

Luck is when preparation meets opportunity. Not only are lucky people creating more opportunities in their lives. They are working on being ready for them.

How many people spend an hour every day reading a fascinating book, so they can have more ideas, compound knowledge and be a lot more interesting during a conversation? Being more useful helps to build a better and wider network of friends and acquaintances, which brings more great opportunities in your life.

Is it luck when you write a well-thought-out post every day and you are able to amass a large following over the years and eventually you get an amazing book deal that kick-starts a lucrative speaking career?

Is it luck investing in a hundred startups in 10 years, learning how the business works, and eventually picking one that returns 100 times your money?

Is it luck when someone consistently finds great trading ideas in the market or is it a skill honed by years of looking at hundreds of charts on a daily basis?

Is it luck noticing when the market has changed its character and adapting properly to the new reality or is it a skill created by many years of carefully studying market cycles and corrections?

How many people know their exact strengths and have chosen a profession that would maximize their natural strengths? How many have chosen to work in an organization that is most likely to reward them for their strengths?

Lucky people take practical steps to reduce the impact of bad luck in their lives.

Everyone has bad days in their lives. Not everyone approaches bad days with a positive attitude, an understanding that challenges are the salt of life, troubles are temporary and in the end, everything will end up well.

How many people are conscious of their diet and work out regularly, so they don’t get sick more often?

How many people proactively work on their core and their posture, so they don’t get frequent back injuries?

How many people make a conscious effort to laugh every day, so they are happier and therefore more productive and creative?

How many work on learning a new skill or improving an existing skill every month? 

How many consciously pick the people they spend the most time with because they understand the impact of their closest friends on their overall lives?

What looks like luck is often the result of attitude towards life.

Having a positive mindset can make all the difference in the world. Our expectations influence everything that happens to us.

What type of behavior is likely to create more and better opportunities?

Imagine you go into a meeting, expecting everything to go flawlessly. Your positive attitude will be immediately reflected in your overall behavior, your body language, which in turn will impact the way everyone else at the meeting feels and behaves. An upbeat approach is likely to lead to a great atmosphere of productive sharing and problem-solving. Compare that to someone who goes into a meeting in a gloomy mood and with low expectations. His negative mindset will immediately impact his overall demeanor, which will have an effect on the way other people respond and behave.  Such type of approach is likely to lead to fewer smiles, more wasted time, negative energy, and less collaboration.

The path of least resistance is to accept that most of life is luck. The trouble with such way of thinking is that it robs you out of the opportunity to actually work on getting luckier.

“Luck is not a magical ability or a gift from the gods. Instead,

it is a state of mind―a way of thinking and behaving.”

Dr. Richard Wiseman, Author of The Luck Factor

The Future of Tesla

 

Toyota averages about $2,700 earnings per car by making 10.2 million vehicles per year.

Ford earns about $1000 per car by producing about 6.4 million vehicles per year.

Porsche earns about 17,000 by making about 225k cars per year

Tesla made 84k vehicles in 2016. The price tag of most of them is 80-120k. It’s hard to estimate how much are they making per car because Tesla is reinvesting all its income into building capacity and innovation.

Tesla 3 is expected to be a game changer for the company and the car industry. The trouble is that at 35k, Tesla is not going to make any money on it. At least, not in the first 1-2 years until it reaches a capacity that cut its costs down significantly.

Looking at the price action in TSLA, there are a lot more bulls than bears; a lot more believers than disbelievers. The latter is important for two reasons:

  1. Expectations can turn into self-fulfilling prophecies.
  2. All trends need doubters; otherwise, there would not be anyone left to buy.

Disclosure: No current position in any of the stocks mentioned.

The Best-Performing Hedge Fund

If there has ever been a money-making machine on Wall Street, it is the Medallion fund. Between 1989 and 2000, it returned 36% after fees. Between 2000 and 2013, it returned 21% after fees, including a 98% return in 2008 when the S&P 500 lost 38%. The fund has managed to extract more than 60 billion dollars from financial markets during its 30-year existence.
The quant fund was started in 1986 by the mathematician Jim Simon. The fund had a strong start by allocating 85% of its capital to trend following models and only 15% to short-term trading models.Then, it had a 25% drawdown in 1989. Simon suspended trading and spent the next six months studying what went wrong. Simon’s conclusion was that their trend following models had run out of juice. Too many commodity funds were using the same systems, which has eroded an edge that used to work wonderfully in the 70s and most of the 80s. Simon decided to make short-term signals the new heart of his trading system. His thesis was that small short-term gains can compound fast.
How did they manage to consistently make so much money for so long when most hedge funds are one-hit wonders or mediocre from the start?
The number one reason is by constantly innovating and experimenting, by creating systems that don’t look intuitive to the human mind. Great computer programs think in a completely different manner than human brains. Medallion has never hired an economist. It prefers to hire PhDs in mathematics, physics, statistics, computer science, chemistry. They focus on developing unconventional edges. Their system trades several hundred different models. The edge of each model is minor when taken individually. But when taken as a whole, the hundreds of minor edges add up to substantial returns.
The number two reason is that Medallion managed to keep its system a secret or at least it has made it so complicated that it is not easy to replicate by ex-employees. The only way to keep a secret is to make your employees rich and incentivize them to keep innovating. Medallion asks their employees to invest 20% of their salary in the fund and don’t let them redeem it for four years after leaving the fund. Also, they have closed the fund to outside investors.

10 Insights from the Book ‘Angel’

This book is brutally honest and a must read for wanna-be angel investors and founders. Jason might sound a little condescending at times, but he is sharing valuable insights earned the hard way.

 

Here are ten of my favourite insights from the book:

  1. What angel investing and the lottery have in common.

I buy lottery tickets for a living, but unlike the normal schmucks on the street, I get to buy tickets that are in the top 1   percent of the winning pool.

2. The people that dare to take more risks intelligently are typically luckier in life.

If you learn anything from this book, it’s that you must take risks as an angel investor and in life if you want at least the chance of an outsized outcome.

You can make your own luck in this life by putting yourself next to the people who are already winning.

3. The business of angels

If these businesses didn’t look completely crazy, then everyone would want to invest in them and there would be no need for angels. In fact, the term “angel” is used because we are the investors who come to a founder’s rescue in their hour of need— when nobody else believes in them.

The best angels in the world have four qualities, giving them the ability to (1) write a check (money), (2) jam out with the founders over important issues (time), (3) provide meaningful customer and investor introductions (network), and (4) give actionable advice that saves the founders time and money— or keeps them from making mistakes (expertise).

Your job as an angel investor is to block out the haters, doubters, and small thinkers, because if you think small you’ll be small. I’d rather see my founders fail at a big goal than succeed at a small one.

Remember there are a hundred reasons why these things fail, so you’re not going to have a hard time saying no, and there are typically only one or two reasons to say yes.

Founders always share investor meeting details with each other and your reputation is everything in our industry. If you are helpful, present, and considerate, then you’re going to get a great reputation. If you are unprofessional, cavalier, or conceited, or use your position of power in any way that isn’t in service of the founder, then you’re toast.

4. The best deals are not available to just anyone.

The best deals are typically not on platforms like AngelList or at incubators like Y Combinator or 500 Startups. The best deals never see the light of day. They’re quickly filled by insiders who are sharing deal flow, and by elite founders with killer startups tapping their existing network.

5. On the best investment, you can make.

I passed on investing in Twitter because I was, at the time, a founder of companies. I stupidly thought that the best investment I could make was in my own company.

It was at that point I realized that I didn’t need to know if the idea would be successful. I only needed to know if the person would be. It was clear as day to me that whatever Ev worked on would be successful, but my own ego and my need to be right and understand everything got in the way of me hitting my first big home run.

6. There’s no difference between the founder and their company

As you go through your angel investing life, take some time to evaluate the person and their motivations. Ask yourself a simple question: “Would I buy stock in this person if I could?” If you wouldn’t buy stock in a founder, you shouldn’t buy stock in their company— because there is no difference between the founder and their company; they are one and the same.

7. Why are you doing this?

If folks are building a startup for money, they will eventually quit when they realize there are many better ways to make money faster and with more certainty. If you want to make a lot of money, you’re better off being a world-class programmer on a very esoteric and in-demand vertical and getting Google or Facebook to give you $ 1 million-plus a year in stock and cash for ten years in a row. You have no downside, you can work a couple of hours a day, and you get unlimited free food.

8. Why startups fail

The number one reason a startup shuts down is not actually running out of money, which is what most people believe. The number one reason a startup fails is that the founder gives up.

9. On communication between founders and angels

“If a startup isn’t sending you monthly investor updates, it’s going out of business.”

The more concise and professional the updates, the greater the chances that angels will be able to help you, including investing more money and introducing you to their friends as a responsible founder who’s a delight to work with. Angels want to feel needed, and founders who don’t make their angels feel needed have lost their most likely source of follow-on funding— their current investors.

10. The market is constantly changing

What worked when I started investing, when there were one-tenth as many startups being formed every year, doesn’t work today. It was wise to invest in great teams, pre-product back then, where today you almost universally want to wait for the founders to finish their product and get to market before investing.

Source: Calacanis, Jason (2017-07-18). Angel: How to Invest in Technology Startups—Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000. HarperCollins. Kindle Edition.

Further reading: Fred Wilson on What It Takes To Be A Great Angel Investor

The Secrets Behind Profitable Trading

There are two main concepts one needs to understand and maybe learn the hard way, before becoming consistently profitable:

  1. Different setups work in different markets.

The same setup that can deliver outsized profits on one trading environment might lose you money in a different market. For example, buying strong stocks in hot industries in anticipation of a breakout works great during market uptrends, but it is a system with no edge at best during range-bound markets. Buying breakouts after a few days of a general market rally in a range-bound environment is not a profitable approach. Swing trading is a lot more challenging during corrective markets when correlations between stocks are very highs, volatility is ginormous and the market changes its direction frequently. Intra-day trading is a lot more profitable during fast corrective markets than during low-volatility steady market uptrends, when swing and position trading provide more lucrative alternatives.

Edges come and go because markets are constantly changing – sometimes, in a predictable, cyclical manner; other times, in a completely new and unexpected way. The path to survive and grow is to constantly experiment with new ways to make money and protect capital.

2. The concept of holding power.

Many novice market participants trade with too much size and get easily scared out of sound positions.

Holding power comes from two things:

a) A good entry – this means picking the right setup for the current market. A good entry helps to keep our potential loss small, while it provides the opportunity to make multiples of our initial risk. Risking a dollar to potentially make three dollars per share.

b) The right position size – I risk between 0.5% and 1% of my capital depending on the market.

Leverage and trading too big have ruined not one or two accounts. I became much better and consistently profitable trader once I cut my position size to reflect my current trading capital and the current market environment. Not all markets provide equal opportunities for profit. There are times to be aggressive. There are times to protect capital and confidence.