Teach Me Like I'm Five: Investing Concepts Made Simple

Excess Returns
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We’re on a mission to make investing concepts simple. In each episode, we bring in an expert to help us break down a key financial idea—whether it’s a rule of thumb, a market principle, or a tool investors use every day. We ask the questions you might be afraid to and focus on clear, accessible explanations that anyone can understand. If you’ve ever felt confused by financial jargon or just want a better grasp on how things really work, you’re in the right place. We’re learning right alongside you—one concept at a time.

Episodes

  1. Sep 29

    The Game Was Rigged in Their Favor. 28% Went Bust Anyway | Kris Abdelmessih on How to Size Bets

    How much of your portfolio does a good investment idea deserve? Kris Abdelmessih of Moontower joins Matt Zeigler to explain why having an edge is only part of the decision: position size can determine whether favorable odds translate into long-term growth or damaging losses. Through a coin-flipping experiment and everyday examples, Kris makes the Kelly Criterion accessible without a complicated derivation. The conversation explores the difference between expected returns and compounded wealth, why growth-maximizing bets can still be uncomfortable, and how uncertain probabilities make a case for betting less. From portfolio decisions to insurance and extended warranties, the goal is to build better intuition about how much risk to take. Topics covered: How a favorable coin-flipping game exposed costly mistakes in bet sizingWhy maximizing the expected payoff of one bet differs from maximizing long-term compounded growthHow oversized bets can undermine an otherwise profitable opportunityThe Kelly Criterion's three inputs: probability of winning, probability of losing, and payoffWhy a constant percentage of your bankroll means changing the dollar amount after wins and lossesHow different payoffs change the appropriate size of a betApplying the framework to hypothetical self-insurance and extended-warranty decisionsWhy full Kelly can involve substantial drawdowns, and the tradeoffs of fractional KellyWorking backward from a position size to the odds needed to justify itAllowing for uncertainty in your estimates and preserving capital for future opportunitiesThe essay behind this conversation: After this post you will be sizing bets in your head https://www.panoptica.com/after-this-post-you-will-be-sizing-bets-in-your-head/ Research discussed: Rational Decision-Making Under Uncertainty: Observed Betting Patterns on a Biased Coin https://arxiv.org/abs/1701.01427 Kris Abdelmessih's Moontower newsletter: https://moontower.substack.com/ Moontower: https://moontower.ai/ Kris Abdelmessih on X: https://x.com/KrisAbdelmessih Chapters: 00:00 Position sizing and the favorable coin-flip experiment 04:45 Why a good bet can produce bad outcomes 13:49 The Kelly Criterion formula explained 18:10 Adjusting your bankroll and accounting for the payoff 23:03 Applying Kelly to a self-insurance decision 30:25 Full Kelly, drawdowns, and reasons to bet less 34:59 Working backward from bet size and evaluating warranties 41:09 Volatility drag, uncertain odds, and the experiment's results 46:09 How much capital does your edge deserve? Learn more about the Excess Returns podcast network: https://excessreturns.co No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

  2. Sep 24

    How to Learn From Buffett, Graham and Other Great Investors Without Copying Them | Gary Mishuris

    How do you learn from Warren Buffett without simply copying him? Gary Mishuris, managing partner and CIO of Silver Ring Value Partners, joins Matt Zeigler to explain why building your own investing process matters more than memorizing great investors' quotes, and how he uses AI to strengthen that process without outsourcing judgment. Drawing on his experience investing and teaching, Gary Mishuris explores the lessons of Benjamin Graham and Philip Fisher, the balance between conviction and flexibility, and his own mistake of putting too much weight on valuation. He also shares practical examples of using AI to screen companies, challenge investment theses, and revisit existing holdings while keeping the final decisions in human hands. Free online Value Investing Seminar signup https://mailchi.mp/silverringvaluepartners/vis Company Overview Deck Skill https://behavioralvalueinvestor.lemonsqueezy.com/checkout/buy/22dc0ac3-5bae-4dec-a2e4-95b03ace4c6c Gary's published code for 100% off the skill: YZMDK4NQ Gary Mishuris' AI toolkit and workflow guides https://newsletter.behavioralvalueinvestor.com/p/the-toolkit Topics covered: Gary Mishuris' framework for learning from great investors: understand, apply, and customize.Why copying Warren Buffett's language or holdings is different from developing his depth of understanding.Combining the analytical rigor of Benjamin Graham with Philip Fisher's focus on business quality.What poker psychology reveals about investing under pressure, and why paper portfolios cannot replicate the emotional stakes.Finding an investing style that fits your temperament while balancing conviction with a willingness to change your mind.Gary Mishuris' biggest mistake: focusing too much on cheapness and too little on how businesses were changing.Where AI can amplify an existing investing edge, and why a polished report is not the same as a capable analyst.Using Company Overview Decks to decide which ideas deserve deeper research, including companies in Japan.Using AI as a devil's advocate to test assumptions, surface risks, and reassess long-held positions.Focusing on the research process and decisions you can control as markets and technology evolve.Timestamps: 00:00 Gary Mishuris and the Value Investing Seminar 05:28 Learning from Warren Buffett without copying him 12:59 The curriculum: analysis, business quality, and psychology 19:07 Why the investing masters' historical context matters 25:50 Balancing conviction and flexibility 30:42 Gary Mishuris on his biggest investing mistake 35:29 Moving from AI chatbots to an investing workflow 42:24 Company Overview Decks and screening investment ideas 49:06 Building a devil's advocate into the research process 59:58 Adapting your process and controlling what you can Learn more about the Excess Returns podcast network: https://excessreturns.co No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

  3. 12/08/2025

    The Art of Breaking Down a Business | Matt Reustle

    In this episode of Teach Me Like I'm Five, Matt Zeigler sits down with Matt Reustle of Business Breakdowns to unpack how great businesses actually work, why pattern recognition matters more than stock picking, and what investors can learn from studying the economics, value chains, and management decisions behind the world’s most durable companies. This conversation breaks down how to analyze a company from first principles, what separates good businesses from great ones, and the recurring traits shared by long-term compounders. If you want to improve your investment process, understand business models, or learn how elite analysts think, this episode delivers a masterclass in fundamental analysis and business pattern recognition. Topics covered: • How to start analyzing any business from scratch • Understanding revenue models, value chains, and industry economics • The difference between transactional and recurring revenue • Why aftermarket services can be more profitable than product sales • How cash flows through an industry and who captures the value • Examples of hidden compounders in everyday industries • What business breakdowns reveal about macro environments • How investors should think about secular tailwinds vs GDP-level growth • The three traits shared by exceptional companies • The critical role of management teams and financial hygiene • Capital allocation lessons from top operators • Why durable tech growth is so hard to evaluate • How intangibles shape competitive advantage • What Amazon, Robinhood, and other companies teach about evolution • The hidden business value inside SpaceX and Starlink • Whether overall business quality has structurally improved • Why pattern recognition is more valuable than gut instinct • The single most important question to answer when analyzing a company Timestamps: 00:00 Understanding what drives repeat sales 00:09 How businesses really make money 01:09 Opening and guest intro 02:00 How to begin researching a complex company 04:49 Using investor presentations and sleuthing for insights 05:12 Non-obvious revenue drivers in major industries 06:20 What to look for in early discovery 07:00 Mapping value chains and cash flow dynamics 08:46 Who captures value in industries like oil and gas 10:20 What 150+ business breakdowns reveal 10:48 Surprising hidden compounders 12:28 Lessons about industry cycles and secular growth 14:52 How to think about next steps after understanding a business 17:34 Pattern recognition in investing 18:00 How much work it really takes to understand a company 19:00 What rigorous analysis teaches you 20:44 Traits that separate great companies 21:24 Self-reinforcing sales models 23:00 Financial hygiene and cash economics 25:15 Adaptability as a core business superpower 25:44 How these insights evolved over time 27:31 Evaluating management teams 29:42 Capital allocation as a defining skill 32:02 How tech companies evolve and compete 34:15 What makes durable tech growth difficult to judge 36:11 Understanding intangibles and company DNA 38:16 The difference between real and exaggerated narratives 41:04 How companies like Amazon repeatedly reinvent segments 42:14 Why some companies survive major failures 44:24 Breaking down Apollo’s complex business 47:00 Lessons from Home Depot 52:00 What GE teaches about cycles and capital allocation 55:27 How to understand SpaceX as a real business 58:28 Has overall business quality structurally improved? 01:02:00 Why pattern recognition matters more than stock picking 01:04:33 Missteps and lessons 01:06:00 The single most important metric to identify 01:07:00 Where to find Matt Reustle online

  4. 09/09/2025

    The Greek That Breaks Traders | What Every Investor Needs to Know About Gamma

    In this episode of Excess Returns, Matt Zeigler sits down with Kris Abdelmessih and Matt Cashman to break down one of the most important — and often misunderstood — concepts in options: gamma. They explore what gamma really is, how it interacts with delta and theta, why gamma scalping (a.k.a. delta hedging) matters, and what both individual traders and professionals need to know about it. If you’ve ever wondered how options traders actually make money from volatility, this is your guide. Topics Covered Why understanding gamma is critical to options trading The relationship between gamma, delta, and theta Using physics and middle school math to explain gamma’s role How gamma P&L works and why it creates curvature in returns Where gamma “lives” (at-the-money vs. in/out of the money, short vs. long dated) The mechanics of gamma scalping and delta hedging Why option trading is really volatility trading The practical applications for retail traders and professionals Common misconceptions about “income from options” Timestamps 00:00 – Why gamma matters in options trading 02:22 – Defining gamma and its sensitivity to price moves 05:04 – Practical explanation: delta vs. gamma 09:00 – Physics/acceleration analogy for gamma P&L 18:00 – Mapping acceleration math to options gamma 23:30 – Where gamma lives: at-the-money and near-expiry options 29:00 – Introduction to gamma scalping (delta hedging) 36:00 – When gamma trading works best (volatility path dependence) 41:00 – Real-world applications for individuals and professionals 47:14 – Why selling options isn’t “guaranteed income”

  5. 07/21/2025

    The Lie Your Stock's Price is Telling You | Kris Abdelmessih on Why Options Hold the Truth

    What can bar bets, coin flips, and the length of your subway commute teach us about options pricing? In this episode of Excess Returns, Matt Ziegler is joined once again by Kris Abdelmessih to break down complex options theory into intuitive, real-world analogies. From prediction markets to probability distributions, Kris helps us understand how the options market reveals what the stock market often hides—how investors are pricing not just if something happens, but how much it matters when it does. This is options math with a twist, taught like you’re five, but ready for Wall Street. 📈 Whether you're an investor trying to size a high-risk, high-reward position, or simply curious about how the market “thinks” about uncertainty, this episode is full of mental models you’ll want to revisit. 📌 Topics Covered: Coin flips vs. futures: the two dominant styles of betting Over/under bets and what they teach us about prediction markets Why odds ≠ probabilities—and how to convert between them The difference between probability and magnitude in financial outcomes Bar bets and beer-drinking contests on Wall Street (!?) Using call spreads to isolate probabilities, not potential profits A visual breakdown of skewed vs. symmetric return distributions Why two stocks can have the same price but completely different implications How the options market understood the dot-com bust better than most investors Why thinking in bets makes you a better investor and allocator ⏱️ Timestamps: 00:00 – The stock market vs. the options market 01:42 – Over/under bets and their connection to options 05:59 – Understanding prediction markets and odds 10:00 – Future-style bets: Magnitude vs. probability 14:35 – The subway commute example and tail risk 19:00 – Why volatility and skew matter in pricing 20:38 – Stock A vs. Stock B: Same price, different outcomes 24:00 – Visualizing probability distributions 28:00 – How call values reflect both vol and probability 32:00 – Truncating the tail: turning options into “bar bets” 35:00 – Using call spreads to extract implied probabilities 37:00 – What investors can learn from this framework 39:00 – Options markets during the dot-com bubble 40:45 – Where to follow Kris online 🎙️ Guest: Kris Abdelmessih 🧠 Follow Kris’s work: https://moontower.substack.com

  6. 07/10/2025

    Gamma, Vanna, Charm and the Basics of Options Dealer Flows

    What if the biggest market moves aren't driven by fundamentals—but by flows you can't see? In this episode, Brent Kochuba of SpotGamma joins us to explain the hidden mechanics of the options market that are quietly reshaping stock prices. We explore how dealer hedging, gamma squeezes, and volatility dynamics like Vanna and Charm are influencing everything from individual stocks to the S&P 500. Whether you're an active trader or a long-term investor, understanding these forces is crucial to interpreting today’s markets. We discuss: Why dealer flows are moving billions in stocks each day What Gamma, Vanna, and Charm really mean—and why they matter How implied volatility creates powerful reflexive market moves Why options expiration dates often mark key turning points What long-term investors should know about short-term flows Real-world examples: GameStop, Tesla, Nvidia, COVID, and more Even if you never trade an option, this conversation will change how you think about market behavior.

  7. 05/28/2025

    The Hidden Logic of Options | Put-Call Parity Explained With Legos

    In this episode of Teach Me Like I'm 5, options expert Kris Abdelmessih breaks down one of the most foundational—and misunderstood—concepts in options trading: put-call parity. Using Lego analogies, homemade spreadsheets, and Fast & Furious references, Kris shows how options are like building blocks you can combine to create any payoff you want—including replicating a stock itself. Whether you're a beginner trying to understand options basics or a seasoned investor looking for deeper insights into synthetic positions and implied interest rates, this episode is packed with practical lessons presented in the most approachable way possible. What We Cover: Why calls and puts are “the same” through the lens of put-call parity How to visualize and replicate stock payoffs using only options The concept of synthetic positions: synthetic stock, calls, and puts How put-call parity collapses complex strategies into basic building blocks The real mechanics behind covered calls—and what they really are How professional traders use options pricing to infer interest rates and stock borrowing conditions A deep dive into "box spreads" and how they replicate zero-coupon bonds

  8. 05/22/2025

    Decoding Volatility with the Rule of 16

    In this episode of our new show Teach Me Like I'm 5, we’re joined by Mat Cashman, Principal of Investor Education at the OCC, to break down a powerful yet often overlooked concept in options trading: the Rule of 16. Whether you're new to volatility or a market veteran, this conversation takes you from the sandbox to the risk desk, explaining how this simple rule transforms annualized volatility into daily insight—and how professionals use it to assess market surprises, portfolio risk, and trading decisions. What We Cover: What the Rule of 16 is and why it mattersTranslating annualized volatility into daily expectations Why understanding standard deviation helps traders interpret large price moves How experienced traders use the Rule of 16 to adjust to fast-changing volatility Real-world examples including recent five-standard-deviation events The psychological and behavioral impact of “surprising” moves on market participantsHow to build a daily baseline for expected price movement Using the Rule of 16 to contextualize options positions and risk management

  • 8 Episodes

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We’re on a mission to make investing concepts simple. In each episode, we bring in an expert to help us break down a key financial idea—whether it’s a rule of thumb, a market principle, or a tool investors use every day. We ask the questions you might be afraid to and focus on clear, accessible explanations that anyone can understand. If you’ve ever felt confused by financial jargon or just want a better grasp on how things really work, you’re in the right place. We’re learning right alongside you—one concept at a time.

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