Four Things to Think About

This week's letter is an abbreviated form, as I try to juggle the overcommitments of family travel.

But I had fun with it regardless, and I would love to hear any comments.

Below are four ideas that I have been thinking about.

I am not irrational. I am playing a different game than you.

After hosting over 1000 financial podcasts, here is one thing I have learned: Most financial debates are people with different time horizons arguing over details that don’t matter to the other person.

The irony of this human need: We crave admiration. Yet we admire people who don’t care what people think about them.

Critics and supporters offer us the same thing: An opinion about our performance. You can only ignore the critics if you also discount the praise.

Losing a debate is winning a debate.

If I debate with someone about an idea I am very passionate about - and the other person systematically dismantles my points of conviction and disproves all of my assumptions - I am not the loser - I am the winner. I come out of the conversation with an expanded point of view, with a new awareness of my blindspots and having added new perspectives to my arsenal of knowledge.

There are two types of people in the world: Those who want to learn more and those who want to defend what they know.

The “Prisoner’s Dilemma” can work two ways.

The Prisoners dilemma is a concept in game theory that says this:

Two individuals are arrested and charged with a crime. They are held in separate cells and cannot communicate with each other. The prosecutor has enough evidence to convict on a minor offence but needs more information to push a more significant charge.

The prisoners have a choice: they can betray their friend and provide the additional information in exchange for a lighter sentence or stay silent.

Here is the dilemma:

If Prisoner A and Prisoner B both remain silent, each of them will serve only one year in prison (on the lesser charge).

If Prisoner A betrays Prisoner B - but B remains silent, then A will be set free, and B will serve three years in prison (and vice versa).

If Prisoners A and B betray each other, then each will serve two years in prison.

Although the best outcome would be for both to remain silent, the risk of being betrayed is too great, and in most cases, each prisoner betrays the other, and they end up with a longer sentence.

You can find parallels of this theory throughout world history when two world powers rise together. Although cooperation would be the more prosperous option, conflict is inevitable one.

The prisoner’s dilemma is the risk that if I don’t swing first, then you will.

Oddly, in relationships, this often works the other way around. Business partners, couples and friends will stay together far longer than serves them as neither wants to initiate the pain of a “break up.”

Overstaying our welcome in a relationship - in business or otherwise can depress the memories of past successes, which otherwise may have been celebrated. Knowing when to leave is a superpower - as uncomfortable and challenging as it may be.

Now, on to the portfolio.

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Nothing I write or say is investment advice. You are the only one responsible for your investment decisions.

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