Lucky Maverick: The Art and Science of Betting on Yourself

Jonathan Bales
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  • Entrepreneurship

A podcast for independent thinkers luckymaverick.substack.com

  1. 03/17/2023

    The Eight Most Impactful Concepts That Changed My Life (And 30 Other Important Ideas)

    About Lucky Maverick About Jonathan Bales At one point in my life, I thought that in Pizza Hut’s “Makin’ it great” ad campaign, they were actually saying “Brickin’ a brick.” I mean I was a toddler, but still. Brickin’ a brick. I believed this for years, even when I was old enough to logically understand “brickin’ a brick” doesn’t make any f*****g sense. I always thought it would be funny if a big company ran a huge ad campaign with a slogan that was totally meaningless just to see how it would perform. That’s what I’d do if I were in charge. “McDonald’s: Ready for the lightning?” Then we’d spend millions of dollars on it, maybe changing the classic ‘M’ logo to add in lightning bolts, and then I’d get fired. It didn’t matter that I believed Pizza Hut’s slogan was “Brickin’ a brick.” I got by. Even if I believed it today, it probably wouldn’t change much for me. It’s okay to have beliefs that are wrong. Most thoughts—and even actions—don’t matter. The majority of what you think you know is probably wrong, and most of what’s right doesn’t mean s**t anyway. Sometimes, though, you come across an idea that’s truly impactful to your life. It might still be wrong, but at least it’s useful for you, which is better than being wrong and useless I suppose. I think the value of knowledge probably grows exponentially such that most of it is basically worthless but a small percentage is overwhelmingly valuable. This has been my experience, anyway, as a few basic ideas capable of shifting my worldview have been more valuable than everything else I know combined, so I’ve tried to prioritize finding this rare knowledge that actually makes a difference, blocking out almost everything in search of the truly scarce stuff. With that said, I thought it might be cool to talk about the most impactful ideas that have changed my life thus far. The main criteria I used for selecting these is that each idea is something with which I at some point either disagreed or didn’t even really comprehend. It’s really important to get adequate sleep, but everyone knows that. These are all ideas that at some point I didn’t grasp, but ones that made profound impacts to my life once I did. The Big Concepts Convexity Errors, randomness, and “the unexpected” should help you, not harm you. If you’ve read my articles for more than 10 minutes, you probably know I’ve learned so much from Nassim Nicholas Taleb. From black swans to antifragility to being a giant dick to anyone who disagrees with you on Twitter, I’d say I owe more of my success to Taleb than anyone else I’ve read, even if he’s a total dick on Twitter. The main idea that’s changed my worldview is convexity, and specifically the concept of acquiring more benefits than harm from chaotic events. Whereas most people focus on improving prediction accuracy—and sometimes in areas in which that’s nearly impossible—few properly focus on the payoffs, which are more easily controllable and offer a larger usable edge in terms of competition. I applied this to DFS by focusing on ownership and lineup composition instead of projection accuracy. That is, maybe this player or team that everyone thinks will do well actually will, but maybe they won’t, and if they don’t, how can I benefit to the greatest degree? One way to apply convexity to your life is to mimic evolution: * Don’t suppress chaos. Natural selection is what Taleb would term “antifragile”—the opposite of fragile—because not only is it not harmed by chaos, it benefits from it. A species can change for the better fairly quickly in evolutionary terms from a single random genetic mutation. Even natural disasters are positives for most species as a whole, assuming they’re not entirely killed off, because they end up coming back stronger and more prepared than before. Humans, too, are hopefully more prepared for the next pandemic; COVID has been devastatingly brutal, but “good” and “bad” are designations that often change based on your time horizon. What’s bad in a static environment can often be one of the most beneficial things when viewed long-term. “Failure saves lives. In the airline industry, every time a plane crashes the probability of the next crash is lowered by that. So these people died, but we have effectively improved the safety of the system, and nothing failed in vain.” By embracing chaos in all aspects of life, you’re set up for more sustainable long-term success. That’s one reason I tweeted this: Not all jobs are the same and every person is different; there’s no one-size-fits-all plan for everyone. In fact, most people are probably best off in the employee role. Generally speaking, though, one of the biggest misconceptions about being a salaried employee is that it’s safer than something like an independent contractor. Being a contractor isn’t always a great solution—it’s not feasible in some areas and takes a long time to build a customer base—but who do you think is more susceptible to a sharp change in income: someone making $70,000 a year from one employer or someone earning the same amount from eight clients in two different niches? The latter is more volatile, but the former is riskier. Evolution embraces chaos, and in exchange eventually delivers the best results. Without that volatility, there could be no progress. “Nature builds things that are antifragile. In the case of evolution, nature uses disorder to grow stronger. Occasional starvation or going to the gym also makes you stronger, because you subject your body to stressors and gain from them.” Don’t deprive yourself of life’s shocks; they’re what allow for your personal evolution. * Think long. Evolution needs time to operate. This is a characteristic of things that like chaos; they love time. The more time, the better, which runs in opposition to most things, which eventually break down over time. Many people are doing things—whether professionally or personally—that, unbeknownst to them, will not survive over time; they’re eventually going to go busto, as we say in the gambling world. If we’re being honest, most people can’t even calculate expected value in static environments. A much smaller percentage know how to do it over time, choosing what’s optimal in arenas in which the first order of business should be eliminating risk of ruin, i.e. “not dying.” Natural selection does this better than any business in the world; it’s built into the system. Species maximize their chances of survival as a whole above all else. Survive, then optimize. Build systems that embrace volatility and are meant to survive and improve with time. Via negativa Addition by subtraction This is a simple concept, which is that to improve basically anything in life, first look at what you can take away before adding anything. Unhealthy? What are some things you can remove from your diet or lifestyle before adding something like supplements? Unhappy? What can you remove from your life before taking antidepressants? The ‘via negativa’ concept is related to an approach I’ve discussed when it comes to winning games, which is to reverse-engineer a strategy by starting with what success looks like, then working backwards by removing the paths that don’t lead to winning. Think of how a sculptor creates a statue from a slab of concrete; the “truth” of the statue is already there, hidden and waiting to be realized, but only after removing that which isn’t necessary. Leverage Big wins require big leverage. I used to make the majority of my money as a freelance writer. I liked it and hated it at the same time. I liked that I was in control of how much money I made (sort of), and I disliked that I was broke and forced to write all day long to get by. Still, I can write pretty quickly, so once I got rolling and had some companies paying me, it was a decent income. But in terms of making short-term money, I had no ability to apply leverage. What I mean by that was I got paid for what I produced, and that’s it. I was paid for my time, which can become quite tempting if you can quickly create things of value. However, I almost always tried to write evergreen articles I thought could live for a long time. I wasn’t sure why I wanted to do that; it just felt right for some reason. It was one of the best decisions I made because writing in that way was a form of leverage. That’s actually the idea behind what I’m doing right now with this newsletter—building up long-term equity (in the form of trust) that can be cashed in at a later date. I’m not charging for it and I don’t have immediate plans to do so, but my guess is that writing things that (hopefully) help people will always be a valuable use of my time. Traders are of course familiar with leverage, which can make smart men very rich and dumb ones very poor. The same is true outside of markets. I recently wrote about leverage in Sam Hinkie, Leverage & Dynamic Decision-Making. The key to finding real success is to figure out what works and apply leverage. Fundamental to this idea is understanding and accepting today’s wealth is not created by how hard someone works. You’ll have a difficult time becoming wealthy by getting paid for your time. You have to get paid for the value you provide others through your unique knowledge, multiplied by the leverage you place on it. The returns from this sort of work—amplified by the internet—are compounding. This increases the importance of logical decision-making. When the results of your decisions are non-linear, it amplifies their impact. If you consider yourself a sharp decision-maker and you have unique knowledge or skills, there’s never been a better time to get rich. The theoretical bounds of the value you can extract are nearly limitless. Acquire specific knowledge or develop a unique skill. This is a

  2. 04/14/2021

    The Time I Sold Furbies for Money (Audio)

    This is the audio version of my article The Time I Sold Furbies for Money. *Note: You can now listen to all future Lucky Maverick posts on Spotify and iTunes, read in the sweet, soothing, almost tranquilizing voice of Jake. If you like what you hear, feel free to leave a review. If you don’t like what you hear, chances are your volume is too low. Turn it up, then leave a review. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit luckymaverick.substack.com

  3. 02/10/2021

    The Key to Being Contrarian: Think Like a Kid

    About Lucky Maverick About Jonathan Bales If you want to break the rules of grammar, first learn the rules of grammar. - Kurt Vonnegut I used to play this iPhone game called “Fun Run.” It’s sort of like Mario Kart in that you race and there are question mark things you can get that have weapons to kill your opponents (lightning, a bear trap thing, a sword, etc). When I first started playing, I tried to move as fast as possible and finish the race with the quickest time I could. Seems logical…faster is better in any race, right? Maybe, maybe not. You need to perform well to win a race, but the goal isn’t to have the fastest time you can; it’s to have a faster time than everyone else. Those are similar ideas, but not exactly the same. Once I started playing Fun Run more and more, I did the most psychopathic s**t you can imagine and began charting all of the details of the game in Excel—my time, the course, kills, deaths, etc. I was doing this to see which courses were my best because players got to vote on one of two before the race, so I thought that optimal selection would slightly improve my win rate and also I wasn’t a virgin at this time if you can believe that. As I tracked the data, I noticed that while my win probability improved, my times barely got better. Why? It was due to the recognition that, while fast times and wins are correlated, the former is really just an effect of the latter, not always a cause of it. There are many times it benefited me to reduce my expected time to increase the odds of winning, such as going out of my way to obtain an additional question mark, using a super low-variance strategy late in the race if I’m winning, taking more risks when I’m losing, and so on. In all games, you work within the confines of the rules to find edges and increase your chances of winning. Sometimes, though, specifically as you become well-versed in a game and begin competing at the highest level, you realize world-class performance requires a completely different way of thinking. Why is it that in so many areas—from poker to business to video games to chess—the greats seem to be playing a fundamentally different game than their opponents? The path to greatness starts with learning the rules of the game and figuring out how to play within the rules to win. But it eventually transforms into breaking all those rules, approaching problems from a distinct viewpoint to play a game—one I’ll call the “hidden” game—that’s fundamentally different from others. Speedrunning This article was inspired by an email I received about something called “speedrunning.” Hi Bales, When reading Lucky Maverick articles, I find one area that continuously applies these concepts: speedrunning. If you're unfamiliar with speedrunning, it is a community of gamers that attempt to beat video games as fast as possible. For example, the current world record to beat Super Mario Bros on the NES is 4:55.314. Speedrunners are fighting over frames and fractions of seconds to secure world records, which is why they have to apply some of the tenets of the Lucky Maverick posts. The two main strategies that are applicable in speedrunning are taking ideas to their logical extreme and playing the game by different, hidden rules. A great example of this is in the speedrun for Wii Sports Resort Golf. The main strategy that runners realized after thousands of attempts was that they were able to manipulate both wind and cup position by intentionally failing the first hole. This is counterintuitive to conventional thinking of “the fastest way to play Wii Golf is to just get the ball in the cup as quickly as possible.” By finding these hidden mechanics of the game, and taking them to their absolute extreme, these runners were able to take the world record down multiple minutes from the early days of running. I really enjoy your newsletter and would be happy to discuss speedrunning further if you'd like. Feel free to reach out/or use this as a topic if you are interested. Best, Chris A few notes: * I love when you guys send me emails with awesome stuff you’re reading, watching, or otherwise learning about. I can’t always give super-long responses—and sometimes the emails suck ass, no offense—but for the most part, they’re really great. I imagine the average Lucky Maverick reader is either a super-sharp worldly scholar or a degenerate gambler who responds to his grandmother’s innocent claim that it takes less than 10 minutes to drive into town with “Oh yeah, how much would you bet? I’ll give you 2-to-1.” Anyway, keep sending me sweet content that you’re enjoying. * In this particular case, I’ve gotten deep into the lab on speedrunning. Even if you’re not that into video games, the way in which the top players go about solving each game is this absolutely beautiful combination of efficiency and innovation—shaving fractions of a second off of their times with small optimizations while also making giant leaps through completely outside-the-box tactics. * I’d say I’ve played an average amount of video games in my life—maybe a bit less—but like everything I’ve done, rather than a healthy and balanced approach, I’ve become completely obsessed with just a handful of games. As an example, I was the No.2-ranked player in NCAA Football on Xbox for a two-year period in high school. I played all day long, every day, and I’d have my little brother put on the headset and talk smack to my opponents so they’d tilt their faces off thinking they’re getting whooped by a six-year old. I played like 15 hours a day, which tells you that no matter what you do in life, there’s always someone out there, somewhere, who is a bigger loser than you. This article is going to be about how to truly think differently, using speedrunning as a foundation for the main points. It’s not required, but I’d check out this video and others from the same name—Summoning Salt—on YouTube. Let your curiosity—and not the need to win—guide you. Not all who wander are lost. – J.R.R. Tolkien I’ve been playing racquetball with my friend Adam Levitan for a few years. I sucked when we started. I never played a racquet sport and my cardio was total s**t, whereas Levitan was in decent shape and had played tennis for years. My only hope was to hit the ball up into the ceiling so it would bounce high off the front wall and slowly drop in the back, hopefully bouncing weirdly in the corner. I wasn’t good enough with my racquet to consistently hit winners and if the game became too fast-paced, I basically looked like a fish out of water, flopping around, completely unable to breathe. But I became curious about racquetball and began watching pros on YouTube. It turns out that Kane Waselenchuk and Rocky Carson and all our heroes on the court didn’t play like me, if you can believe it. Sometimes they hit flop shots, but I realized that it would be impossible to win long-term against a great player without hitting very low, accurate winners into the corners. Another thing I noticed my friends Kane and Rocky didn’t do was continually smash their racquet into the court when they lost. I watched hours of play, and they literally never repeatedly banged their racquet into the ground until it was demolished, then immediately order a new one on Amazon. Not once! I blame Amazon Prime and their uber-fast and reliable shipping. I’d have much better sportsmanship if it weren’t for that f*****g Bezos. Smashing my racquet into pieces was a reflection of my hatred of losing, but here’s what that racquetball experience taught me and what I believe is the most important trait in those who think differently to achieve greatness: your path toward perfection must be governed not by a need to win, but rather a natural curiosity and passion for what you’re doing. I really believe this is the primary key to being contrarian, non-consensus, non-conformist…whatever you want to call it. A pure, child-like curiosity will take you off the beaten path to identify the best long-term strategies, not because you’re trying to be different, but because children at play have no choice but to wander. Make no mistake about it: a will to win is absolutely vital. I’m as competitive as anyone I know, hence why my racquets have a shorter lifespan than a gastrotrich. It’s a marine microorganism that lives three days. Now you don’t have to look it up. However, in choosing to win at all costs, what you’re really doing is sacrificing the war to win a battle. If I never attempted to hit more winners in racquetball—which temporarily lowered my win rate—then I never would have improved enough to consistently win. So the need to win is still an essential trait, but it can’t be over a short time horizon. It’s sort of like Amazon continually delaying profits. They’re a company designed to make money, yet have chosen to push back short-term net income in favor of a long-term view. If you extend this idea to its logical extreme, the optimal time horizon for greatness is “forever,” meaning you should let your passions and curiosities dictate your direction. Doing so has compounding advantages over optimizing for the present moment, and those advantages can be “cashed in” for wins at a later date. Just as Amazon and other great companies invest in innovation, you can achieve long-term greatness by investing time in following your curiosities—by “wandering.” Don’t stop at local maxima. Wandering in business is not efficient…but it’s also not random. It’s guided…and powered by a deep conviction that the prize is big enough that it’s worth it to be a little messy and tangential to find your way there. Wandering is an essential counter-balance to efficiency. The outsized discoveries—the non-linear ones—are highly likely to require wandering.  - Jeff Bezos When you don’t let you

  4. 01/29/2021

    You've Been Kidnapped

    About Lucky Maverick About Jonathan Bales You’ve been kidnapped. That’s probably not the start to the day you were looking for. It was already going to be a long day, what with accounting all over your ass about those expense reports—Suzie needs to just lay off if you ask me—and now you have to deal with this s**t? Your kidnapper is a little different than most; he loves statistics and game theory and randomness, and he’s going to let you play a little game to determine if he’ll hold you hostage. No, the kidnapper is not me, although if I were a kidnapper, I’d let anyone free who could beat me in a best-of-101 rock-paper-scissors contest. Meaning I’d never let anyone free. Sentence fragment for dramatic effect. And another. Something you shouldn’t try unless experienced. We’re not playing rock-paper-scissors though. The kidnapper puts three cards on a table, two of which say “MINE” and one of which says “FREE.” He knows which are which, and he tells you that you can leave if you choose the card with “FREE” on it. Damn, a 33% chance of freedom. And even worse, a 2-in-3 chance Suzie’s week-end accounting is going to be askew. She’s already in Robert’s ear about your frequent tardiness. You stay late though, unless you have to pick up the kids, so she really just needs to back off. “Why are you telling me all this, and who tf is Suzie?” asks the kidnapper. “Just pick a f*****g card.” You pick the first. “Nice choice,” the kidnapper says with a laugh before turning over the middle card, which reads “MINE.” With the first card (yours) and the third card still face-down, the kidnapper asks, “Now, would you like to switch cards?” Think about it. Would it help to switch to the third card? You had a one-in-three chance from the start, so does it really matter which card you select or if you change your choice? Are your chances now 50% since there are just two cards remaining? What’s your pick? The Monty Hall Problem This is of course my version of a puzzle you might have heard of called the Monty Hall problem, named after the host of a show called Let’s Make a Deal on which a version of the game was played. I presume some of you have heard of the brainteaser, so I’m going to focus mostly on the implications of the answer, but the gist of the solution is this… Your choice not only matters, but it matters a whole lot, doubling your chances of going free if you make the change. My initial reaction when I heard of this solution was sort of disbelief because it felt so counterintuitive, but it’s right. The key component of the decision that’s easy to overlook is that the kidnapper has knowledge of the cards and, when he makes the choice to show you one of the “MINE” cards, it’s a huge piece of new information. Let’s say the order of the cards is MINE, MINE, FREE… The scenarios can play out in this way: * If you select the first card, the kidnapper will show you the second. If you choose to stay with your choice, you’re his. If you switch, you’re free. * If you select the second card, the kidnapper will show you the first. If you choose to stay with your choice, you’re his. If you switch, you’re free. * If you select the third card, the kidnapper can show you any other card. If you choose to stay with your choice, you’re free. If you switch, you’re his. By changing your selection, your odds of freedom increase from 1-in-3 at the start of the game to 2-in-3. That’s due solely to the knowledge of the kidnapper and his decision to turn over one of the “MINE” cards. Some Takeaways I think the Monty Hall problem is a really interesting game theory and psychology puzzle that has far-reaching implications on the framework we use for certain decisions. * Difficult dilemmas often require counterintuitive solutions. When you first encounter the Monty Hall problem, it just seems sort of obvious it doesn’t matter what you do. The solution—that it’s right to make the switch—is extremely counterintuitive. This is the case with many psychological and game-theory-driven problems, especially. Humans are hardwired to see the world in certain ways, some of which are perhaps useful heuristics to maximize survival, but not as the most effective way to assess reality. Things become even more complex when others get involved, and this is the aspect of decision-making many overlook; the EV of most meaningful choices cannot be properly calculated without a consideration of what other people will think and do. And those problems like Monty Hall, whose solutions are so counterintuitive but also so obviously mathematically correct, are those worth analyzing. * You must consider what other people know that you don’t. The keystone to the Monty Hall solution that nearly everyone overlooks is that they’re acquiring new information once one of the options is removed. If the kidnapper were selecting a card at random and he just so happened to pick “MINE,” it wouldn’t matter if you decide to change or not. In reality, whether or not you chose “FREE” is either 0% or 100%, but our ability to predict whether or not you chose that single card changes over time. When you pick a random card, the odds are 33%. When the kidnapper removes one card and you stay, the odds are still 33%. When the kidnapper removes one card and you switch, the odds are 67%. And if the kidnapper were removing a card at random and it just so happened to be “MINE,” the odds are 50% and it wouldn’t matter if you switch cards or not. What’s interesting here is that in the last two scenarios, the mechanics are exactly the same: three cards dealt, you pick one, the kidnapper removes one “MINE.” What changes the percentages—what shifts our ability to predict the future and ultimately the optimal decision—is the knowledge and intentions of the kidnapper. What matters is what he knows that you don’t, and the same is true in a variety of real-life situations. Poker pros know this well, continually making difficult decisions with new information. Baseline stats are a decent starting point, but your prior beliefs must be adjusted all the time. When someone plays tight and then check-raises out of position, the range of hands he might have needs to be narrowed, in the same way the kidnapper’s offer to remove a card gives information about where “FREE” might be located. Similarly, if you’re in a situation in which a deal looks too good to be true and you know the other side isn’t a dummy, your first thought should be what asymmetry in information might exist that would propel them to do this; what might they know that I do not? And again, the most interesting aspect to me that I want to hammer home is that what transpires can be exactly the same on the surface, and yet our ability to predict the card’s location changes based solely on someone else’s presumed knowledge. The right choice in rock-paper-scissors after both picking rock on the first throw could be paper against one opponent but scissors against an opponent who doesn’t properly understand randomness. (The latter trait leads to alternating as a substitute for “randomizing,” meaning they’re less likely to throw rock, meaning you’d want to throw what loses to rock to maximize your odds of a tie or win…not that I’ve had women lose interest in seeing me after I’ve smoked their ass in rock-paper-scissors on the first date and then explained later in a text why I think they have a big leak in their post-tie strategy or anything like that…no, definitely nothing like that.) * You have to be willing to change your mind. Often. I’ve played a version of the Monty Hall problem with friends, and almost all of them choose to stay with their original selection. You should try it with your friends; nothing brings people closer than a good old-fashioned brainteaser and the accompanying statistical explanation for why they’re an IDIOT. Why do people stay with their original choice? When I stumbled upon the puzzle for the first time, I chose to switch cards—not for any statistical reason or because I understood the underlying game theory, but simply because it seemed fishy to me. Actually, I was also employing game theory, just with different reasoning. My thinking was: * It seems like the “obvious” choice—or at least what most would do—is stay. * I don’t believe there’s a reduction in success rate if I switch. * Thus, if I don’t see downside to switching and it seems like staying is a trick, I’ll switch. Extending this reasoning to other situations, when you don’t see a clear difference in EV among two different options, choose the one that’s less popular. Contrarians know you can find all kinds of success when you stick by the crowd when they’re obviously right and fade them when they’re clearly wrong, but you should typically side with the less popular option when you’re unsure, too. Part of this is due to payoffs, but part is because people stick with losing beliefs for too long. It’s just the way we’re wired. I know I’ve done it in the past. Nah, that Odell guy who barely scored at LSU isn’t going to do well in his rookie season. Guys, it was just a lucky start. His quarterback is Eli Manning. Okay, he’s doing well so far, but it’s just variance. Eh, only seven touchdowns in four games. Yeah, okay, but will he even lead the league in yards per game? Oh s**t, I’m broke. We’re bombarded with so much new information all the time, and most decisions are pretty close calls from the start, that if you aren’t regularly changing your opinions—even contradicting your past self—then you’re being stubborn (and wrong). As an example, sports bettors are tasked with assessing a team’s chances of winning a game at any given point in time and comparing their prediction to the odds being offered. But our best guess of a team’s chances of wi

  5. 01/27/2021

    If You Ain't First, You're Last

    About Lucky Maverick About Jonathan Bales “If you ain’t first, you’re last.” I don’t know if wiser words have ever been spoken. We should all try to think a bit more like the great Ricky Bobby. There are different ways one can aim to be first. In a car race—where everyone starts from roughly the same point—speed is what matters. Small differences in speed compound over great lengths; a little bit faster car will go a whole lot farther over hundreds of miles. It reminds me of this passage from James Clear’s Atomic Habits: Imagine you are flying from Los Angeles to New York City. If a pilot leaving from LAX adjusts the heading just 3.5 degrees south, you will land in Washington D.C., instead of New York. Such a small change is barely noticeable at takeoff—the nose of the airplane moves just a few feet—but when magnified across the entire United States, you end up hundreds of miles apart. Your starting point can have a profound impact on where you end up over long time horizons…if you can’t make adjustments. When you board an airplane and it takes off, though, it doesn’t really matter all that much if the pilot is off by a few degrees. I wrote about this idea in my article How to Improve Your Decisions Immediately: By focusing on choices as existing dynamically, it increases the value of trial-and-error. That is, when you can iterate to “change” the EV of a decision repeatedly over time, it decreases the importance of prior choices. This should be obvious in the airplane example: would you rather be on a cross-country flight with a pilot who spends countless hours attempting to calibrate the most precise takeoff angle but can’t make adjustments along the way, or one who just sort of takes off in the general direction of New York but can make unlimited adjustments? Uh, yeah, the second one. In my article The Secret to Success: Mimic Evolution, I added: The faster and more efficient you can make this trial-and-error cycle, whether it’s in your personal life or your business life, the quicker you will find success. Your starting point for truth is way less important than your process for refining and improving your beliefs, especially when you get away from a static worldview and begin to (appropriately) see it dynamically. Over time, differences in the speed at which you can process information and adapt become exponentially more important than where you begin. By speeding up your trial-and-error cycle, the returns compound over time; being twice as fast doesn’t make you just twice as better, but rather exponentially so. Recently, though, I realized that my claim that “your starting point doesn’t matter” is seemingly at odds with another Lucky Maverick principle I hold to be true: the easiest way to maximize payoffs is to limit competition, and perhaps the best way to limit competition is to be first (or early) to a particular niche. When I look back at my personal triumphs and failures, there’s indeed a trend of finding more success when I’m somewhat early in finding new trends, whether it’s business or crypto or, recently, Topshot (see why I spent $35,000 for a video you can find all over the internet). That’s not to say I’ve been “first” by any means, but simply that the degree to which I’ve benefited from getting involved in a new project is very much correlated to how “early” I found it. And, at the extremes, the benefits of timing are magnified and non-linear. Buying Bitcoin six months after its launch wasn’t four times more valuable than two years after; it was monumentally more valuable. Investing in Topshot moments one month after the site launched wasn’t four times more valuable than four months after; it was dramatically so. The timing of finding a potentially lucrative niche is a sort of “singularity” of value; the closer you get to the starting point, the more extreme the effects become. As you approach that singularity and the payoffs become intense, it just seems intuitively true that it must outweigh anything else. So what’s more important, being early or evolving quickly? Were my seemingly contradictory thoughts on speed vs. starting point truly at odds with one another? To sort out this MAYHEM, I did what any sane person would do and charted it in Excel. A Thought Experiment on Speed and Compound Returns Just as the benefits of +EV investing or exercising or honesty compound over time, so do that of speed. To demonstrate this, I made a graph of hypothetical growth of something that doubles in value every cycle versus every other cycle. Fairly quickly, the compounding advantages of fast iteration are apparent. Again, someone who works twice as fast with the same quality as someone else isn’t just twice as valuable; they’re exponentially more valuable. Having a head start matters, too. Assuming the same speed of evolution between each cycle, there’s a gigantic edge in being first. These effects, too, are exponential. “Move fast and break things” generally works as an approach to building, learning, and evolving because the positive effects of rapid iteration compound over time. Being early to a niche is also of incredible importance. Both speed and timing matter, and they matter a lot. But which is more important, being early or evolving rapidly? Take a look at value over time for someone who is early but slow (starts first cycle, doubles every other) versus late and fast (starts sixth cycle, doubles every one). “Late and fast” wins in a landslide. This seems to confirm the idea that iteration is more important than starting point, but then I had a realization: although both speed and starting point are important, speed matters more in non-zero-sum situations, while being early matters more in zero-sum games. When it comes to Topshot or other competitive games, for example, the results are zero-sum, or at least closer to zero-sum than represented above. Think of a sporting event; each percentage point one team increases in win probability means the other team decreases the same amount. This makes it of incredible importance to find winning strategies before others. When Billy Beane and the Oakland A’s employed “Moneyball,” using data to uncover undervalued players, the benefits of such an approach were theirs and theirs alone to enjoy. Nowadays, most or all teams have analytics departments that do far more than what the A’s were doing in the early-2000s, and so the advantages of weighing certain stats are dispersed throughout the league; in zero-sum games, it’s not what you know, it’s what you know that others don’t. I charted the same numbers as the graph above, but this time took out just 20% of the value generated by the “late and fast” participant. That is, they still start on the sixth cycle and still improve twice as fast as the “early and slow” participant, but this time we assume there’s only 80% of the value remaining at each cycle (the multiple changes from 2x to 1.6x). That small change produces this: This is pretty amazing to me. When “late and fast” can acquire all available value to truly double every cycle, it ends up generating 32x the value as “early and slow” after just 12 cycles. But by removing just 20% of the value “late and fast” can accrue, it generates roughly half the value as “early and slow”—64x less on just a 20% value reduction. The exact percentages here are irrelevant. What’s important is that very small changes to payoffs can dramatically affect long-term value. The more a game trends toward zero-sum, the more important it is to be early, as there are compounding rewards in the form of higher payoffs. This doesn’t mean the game itself needs to truly be zero-sum; investing in the stock market (or Topshot right now) is historically +EV, but you’re still competing with others, and the race to capture that EV is zero-sum, i.e. if the baseline return is +5%, then you’re losing if you return +4%. Now compare these games of competing minds to something like learning to play the piano. As you become better and better, you’re not stealing piano-playing ability from anyone else. Over a pretty short time horizon, your starting point for learning is less important than how quickly you can improve via trial-and-error. In the case of non-zero-sum games, speed matters more than starting point. Going back to the airplane example, the reason that the takeoff angle is of minimal importance is because the “game” of getting across the country is non-zero-sum. But what if pilots were in a competition to see who could reach the final destination as quickly as possible with as few “turns” as possible? Then the takeoff angle matters a whole lot more. When the dynamic transforms to zero-sum, there’s a shift in the relative importance of speed and starting point. Expected Value = Probability * Payoffs. When the payoffs of what you’re trying to accomplish are affected by others, timing matters. A lot. In zero-sum games, your biggest edge will come by getting in on the ground floor to limit competition. In non-zero-sum games, timing doesn’t matter as much. The payoffs of eating healthy or working out or learning a new language aren’t affected by anyone else, and so you’ll achieve the greatest compounding returns by speeding up your learning process via rapid trial-and-error. Are You Okay Looking Like a Fool? The benefits of being early and working quickly are obvious. Being early is a sort of overarching multiplier on the value of future work, while quick iteration allows for a lower multiplier that gets repeated over time. The earlier you are, the higher the initial multiplier, and the faster you can iterate, the greater the repeated multiplier. Both lead to compounding returns. So then why does everyone seem to shy away from things when they’re new and work so slowly even once they’re established? Because they’re scared. Fea

  6. 01/19/2021

    I Spent $35,000 on a Video You Can Find All Over the Internet: Here's Why (Audio)

    About Lucky Maverick About Jonathan Bales This is the audio version of “I Spent $35,000 on a Video You Can Find All Over the Internet.” Click here to read the article. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit luckymaverick.substack.com

  7. 12/18/2020

    Sam Hinkie, Leverage & Dynamic Decision-Making

    About Lucky Maverick About Jonathan Bales Note: If you notice Jake’s voice sounds like he has the flu in the audio version, don’t worry…he doesn’t have the flu! It’s just COVID. I started fishing last year. Like any hobby I take up, I’ve become intensely serious about it to the point no one around me wants to be involved. I started tracking aspects of every catch in Excel; in just over a year, I’m up to 53 different species, not to brag. My goal is to catch as many species as possible. If you ever see someone snagging lunker largemouth bass all day…that ain’t me. I already got that species. No need for more. I’m more of the type to be fishing for microspecies in a puddle using hooks that can blow away with a slight breeze. You don’t know what it’s like to feel the strength of a fish until you’re lightly tugging a minnow out of a puddle using a piece of a worm the size of a grain of sand for bait. Just raw power. Racking up species in fishing is all about leverage. The rod itself is a type of lever, letting you easily reel in even very powerful fish that are much stronger than you in water. I also often use multiple rods—usually one with the bait sitting at the bottom, one in the middle of the water column, and then actively using one with a spinner or topwater bait. You can use three rods at a time where I live, but theoretically, you could use quite a few more rods to increase the number of fish you catch without substantially more effort. Well, the key to finding success—and specifically to making money—is the same as it is in racking up fish species smaller than your pinky: figure out what works—where the fish are and how to catch them—and apply leverage. Leverage in Today’s World Many of my thoughts on leverage have been inspired by Naval Ravikant. Check out his famous tweet thread on how to get rich (without getting lucky): As Naval has pointed out, there are many different types of leverage, with the oldest form being labor: getting people to work for you. This, along with capital, are what people generally think of when it comes to being an entrepreneur or starting a business. And typically, that’s what business has meant: hire employees and raise money to grow. Labor and capital are forms of permissioned leverage, meaning you can’t really just employ them on your own. You ultimately need someone’s permission to work with them, and you need permission to access others’ money. The internet has created new forms of leverage, however, that do not require permission. What I’m doing right now—writing online—is a form of permissionless leverage. I don’t need anyone’s approval to post this, yet it supplies ultimate leverage on my time. This article can live forever, and whether it’s seen by 10 people or one million, there’s no additional work for me. And if I do a decent job, a whole lot of people will trust in me more and more, and that compounds over time in a non-linear way. Software is another form of permissionless leverage. When I co-founded FantasyLabs, we didn’t need to ask anyone if it was okay that we did it. We built a product that can effectively run on its own, 24/7, and scale without any additional work. We can acquire more and more users at nearly no additional cost, whether its more energy or money; no matter if we have 100 users or 100,000 users, the costs in both time and capital are effectively the same. That’s leverage. The internet has created a world in which there’s an abundance of money-making opportunities that allow individuals to earn like companies, but most people don’t yet realize it. There’s a reason we built FantasyLabs as a data and tools platform rather than a service to give picks. One is sustainable and can grow without additional work; the other cannot. There’s a reason I write almost no content that’s time-sensitive. This article doesn’t have an expiration date and can continue to “work” for me forever; a timely article would get more clicks in the short-term, but does effectively nothing to improve long-term leverage. A useful way to figure out what type of leverage you’re applying on your work: ask yourself if the potential rewards are a direct result of the time you put in. If putting in more time guarantees a better result, this might not actually be a good thing; a salesperson working on commission might make more money by putting in more hours, but there’s no ability to earn 10x or 100x or 1,000x on their time. The salesperson—and most everyone else with an employer—is the lever for someone else to get rich. You’ll have a difficult time becoming wealthy by getting paid for your time. You have to get paid for the value you can create for others through your unique knowledge, multiplied by the leverage you place on it. The returns from this sort of work—amplified by the internet—are compounding. This increases the importance of logical decision-making. When the results of your decisions are non-linear, it amplifies their impact. If you consider yourself a sharp decision-maker and you have unique knowledge or skills, there’s never been a better time to get rich. The theoretical bounds of the value you can extract are nearly limitless. * Acquire specific knowledge or develop a unique skill. This is another form of permissionless leverage and it’s easy to unlock with the internet. You probably already have a lot of specific knowledge in areas of interest to you. The intersection of those areas is likely where you have the most unique knowledge. * Apply leverage to your distinct knowledge through media or code, i.e. leverage your knowledge to create online content or software. You can use labor and money, too, but they’re no longer required. * Focus on “evergreen” work; put time into things that have no theoretical limit for how much they can earn and require no additional work from you—things for which the cost of replication is zero or near-zero. And “earn” can mean money, but it can also mean trust or respect or some other output that can be monetized at a later date. I’m not currently making money from this newsletter, but it’s still providing leverage. In the age of near-infinite leverage, you don’t get rich based on how hard you work. You get rich by having specific knowledge, creating something of value to others, and applying leverage to it. Static vs. Dynamic Decision-Making I recently came across this video from Nassim Nicholas Taleb called “How you will go bust on a favorable bet.” Most of the video is pretty mathematical, but it’s ultimately his proof of this quote, which I really like. Your grandmother does not analyze the notion of smoking as a single event of smoking a cigarette, but rather as an activity. Risk-taking is an activity, not a single event. Smoking a single cigarette is not very harmful to your body. Let’s assume you determine the cost-benefit of smoking once to be in favor of lighting up; maybe the relaxation it gives you is mathematically worth the downside for that single cigarette. It still should be clear the decision to smoke is -EV (dynamically speaking) because it will increase the chances of you smoking again…and again…and again. Almost no worthwhile decision is static. When there is great downside, you should make decisions as though you’d need to make the same choice 10,000 more times. You might play Russian roulette once for $1 billion, but if you keep taking such an offer, you’ll soon be dead. That’s not to say you can’t ever take on big risk—the opposite, actually, as you can and should try to run it up when the consequences for financial “death” (going bust) are minimal. That is, if you have $100 to your name, it’s not terribly detrimental to go bust; if you have $1 million, then you probably should protect your downside. Viewing decision-making as dynamic actually increases the merits of taking on huge risk early on—even -EV risks. I’m sure you’ve seen the graphs of what your net worth will be at 65 if you invest $X starting at age 25 instead of beginning at 35. Each additional dollar you acquire is theoretically slightly less valuable than the one before it, but if you’re overall a +EV decision-maker, you could argue the importance of quickly generating a small fortune is more meaningful than slight changes in EV such that the only fundamentally wrong decision you can make is not taking big risks. In my article on why most decisions don’t matter, the first criteria I proposed for making a choice: “Is one option clearly the best long-term?” Decisions aren’t made in a vacuum, and the biggest mistake you can make is viewing them statically—analyzing choices as an event rather than an activity. And the God of long-term decision-making is this man… Sam Hinkie on Invest Like the Best Being from Philly, I’m of course a huge fan of Sam Hinkie (and the ”Hinkie “Manifesto”). I highly recommend listening to his recent appearance on the Invest Like the Best podcast. Some of my favorite quotes: Expertise is a predictive model about the future that works. I don’t care how you got there. It might be instincts. It might be actual data. Experience is how many times you’ve done this. That doesn’t mean people with experience can’t have expertise, but they’re wildly different things. I look for people cognizant of their weaknesses. The ones I really like are the ones open about their weaknesses and keeping them their weaknesses because they think it’s an infinite game that you don’t understand yet. I like people who are among the very best in the world and can’t believe it. They’re worried someone else out there is better. You’re underplaying your skills—not overplaying them—and you’re constantly looking for new edges because you presume there just must be someone out there who is better. Amazing people are often drawn to be around other amazing p

  8. 12/14/2020

    How to Win a Bet: 6-12-18-24

    There comes a time in every man’s life when he must stand up for what he believes in. With the world against him and no true believers on his side, he digs deep, knowing he must fight for what’s right, regardless of the lack of support, and stand firm in the face of mounting opposition. Victorious or not, he will come out the other side filled with a pride few will ever know—a pride experienced only by the rare breed of man with the courage to look evil directly in the face and, not because he has no fear, but in spite of his fear, gain a paradoxical and unparalleled strength to proclaim “I. WON’T. BACK. DOWN.” When the dust settles, he’s transformed into a warrior. A hero. A man of honor. For me, that was a day filled with masturbating for money in Las Vegas. This is my story. This will be part of a “How to Win” series in which I break down how I went about figuring out the optimal way to win a bet, beat a game, or solve a problem. It’s an extension of my in-depth analysis in How to Win Games, which I’d suggest checking out if you haven’t. Part of my theory on winning games—as I discuss in the principles of Lucky Maverick—is that the same sorts of concepts tend to apply across all forms of games, and that if you can learn how to think about and win any game, you can learn to win every game. Most of life’s problems can be turned into a version of a game, so learning to win games, in my opinion, is a recipe for finding success in just about any area you want. The Importance of Rules and the Art of the Negotiation In 2018, I booked a bet with my buddy Adam Levitan on something called the 6-12-18-24 Challenge. If you’re unaware, the bet involves assigning each of those numbers to one of four tasks, then completing all of them within 24 hours. Your missions: eating donuts, drinking beers, running miles, and jacking off. The plan was to complete the challenge in Vegas before the official start of the Gambling Olympics. I wanted to post our actual chat log when booking the bet to show how we went about deciding on the “rules.” The rules—and hidden rules—are of incredible importance because winning any game boils down to working within the confines of that game to find edges that increase your win probability. All of the strategy and meta game are ultimately an effort to unearth EV by exploiting the rules better than your opponents. Knowing the rules—inside and out, truly—is so simple and yet so overlooked as an advantage by most. *Note: Skip to the next section if you just want to read how I went about “solving” the 6-12-18-24 challenge. Or just skip right to closing this browser window if you have any sort of dignity.* jonathan.bales [12:48 PM] what odds are you guys giving me on 6-12-18-24? you said 10 to 1 levi? I think that’s fair :) adam.levitan [12:49 PM] i said nothing.. let’s nail down the official rules.. all your miles have to be under 10 minutes and outside? jonathan.bales [12:49 PM] I mean whatever you want that’s clearly way harder and a potential problem though 10 min is actually hard to do for possibly 12 miles I mean it’s almost a half marathon adam.levitan [12:50 PM] oh i assumed you were running 6 jonathan.bales [12:50 PM] idk if I can JO 12 times after some practice yeah I mean I am gonna have to but I’m running out of steam on these JOs adam.levitan [12:53 PM] if you’re running outside and averaging a 10-minute mile while running them consecutively i can give you 6-1… but I’m not going to give you a lot of action on it, can’t let you beat me for like 30k jonathan.bales [12:53 PM] consecutive? that’s way different don’t think I can do that at all I assumed I could take a break after each mile peter.jennings [12:54 PM] Im on bales side adam.levitan [12:54 PM] oh well then i don’t see why you couldn’t do it you’re in way better shape than the dude who came on the pod and did it and you drink every day doughnuts are easy just gotta get the jerks done and you’ll have freedman to help you there jonathan.bales [12:56 PM] I don’t drink every day for the last time levi adam.levitan [12:56 PM] haha jonathan.bales [12:56 PM] if you think 18/24 beers/donuts is easy then idk and either miles or JOs or both gonna be hard af too I think I am equipped to do it more than avg person but I think I’m likely to fail honestly adam.levitan [12:57 PM] i mean if you take 20 minutes off between each mile it’ll be easy jonathan.bales [12:57 PM] even if you remove that, there’s some decent chance I can’t physically do 12 JOs adam.levitan [12:57 PM] for sure jonathan.bales [1:00 PM] so you’d do 6 to 1 if I ran it straight, no stops at all? like if I fail then I just start back at 0 miles? trying to think of how much easier it is to stop and what that equates to in a line if 6 to 1 is fair for that adam.levitan [1:00 PM] you’d have to average a 10-minute mile for whole thing.. so if you do 6 miles you have 60 minutes total from start to finish jonathan.bales [1:01 PM] there’s almost 0% chance I can complete six miles right now I’ve literally never run two miles adam.levitan [1:01 PM] yeah well if the running isn’t hard i don’t see how you fail really unless your dick fails you jonathan.bales [1:02 PM] he’s good for six easy he starts to get ornery at seven idk how you think 18/24 beers/donuts is just a given that’s so hard and in conjunction with running and jacking off will take 5 to 1 my $1k if I can stop once running adam.levitan [1:06 PM] if you do the total distance across total time you can stop as many times as you want jonathan.bales [1:06 PM] lol need a break. can’t do six miles in 60 min will do two segments of three in 30 it is f*****g Vegas in summer man it is gonna be literally 120 adam.levitan [1:07 PM] i can give you 3.5/1 on that, but i’m not happy about it and only doing it for the #content jonathan.bales [1:08 PM] like it might not even be safe adam.levitan [1:08 PM] don’t be a p***y death is one of the outcomes, yes jonathan.bales [1:08 PM] i’d do 6 to 1 on one hour before 3.5 with a break outside is just bananas i won’t be able to breathe adam.levitan [1:09 PM] the only way i’ll win is if you fail at the running so yes, i’d be rooting for “unable to breathe” jonathan.bales [1:09 PM] https://blogs.scientificamerican.com/guest-blog/too-hot-to-handle-the-dangers-of-running-in-the-heat/ i’ll die for content, it’s fine adam.levitan [1:10 PM] yeah i felt like this in 3rd set of frying pan match you’re so hot you get the chills jonathan.bales [1:10 PM] that was f*****g denver adam.levitan [1:10 PM] yep it was like 90 but i know.. Vegas is asking for death that’s how i want to win jonathan.bales [1:11 PM] I will do 6 to 1, six miles in 66 minutes adam.levitan [1:12 PM] outside? jonathan.bales [1:12 PM] yeah. and I honestly think this is gonna be a disaster because I can barely finish one mile in under 10…ran the other day adam.levitan [1:13 PM] do you have to run during the day? jonathan.bales [1:14 PM] what time range is acceptable. clearly I’m running at night if I can adam.levitan [1:15 PM] ugh i dunno man.. i don’t want to bet against you in physical activities nighttime temps in july in vegas average 79 degrees nice running weather jonathan.bales [1:15 PM] the last mile bet I had I ran a half mile this isn’t lifting adam.levitan [1:16 PM] we won’t be able to film your death if you do it at night jonathan.bales [1:16 PM] I will do it when light out idk how I am gonna set it up exactly…need to think about it and what is best in terms of when I start, when I am trying to run, etc my lean was I’d drink and eat at night, sleep, drink maybe 1 or 2 in morning and run then I can’t wait too long strategically or else I have to run after eating and drinking too much. there’s just no way adam.levitan [1:18 PM] are you allowed to get more action? Like if you can win 5 BTC instead of 2/3 BTC you’ll obv train harder jonathan.bales [1:18 PM] I am gonna try obv….I’d be fine reducing our odds if I get more though like each 10k to win interval I go down a point or something… I will do whatever you want on that b/c you are right I will actually try if I get a bunch of action…I just doubt I will adam.levitan [1:20 PM] OK i’ve wasted enough of this day.. let me think about it jonathan.bales [1:20 PM] comee onnnnn gimme something. have to get this booked adam.levitan [1:21 PM] freedman verification on jerks? jonathan.bales [1:21 PM] I mean obv adam.levitan [1:21 PM] no live women in room obv, even for fluffing jonathan.bales [1:21 PM] for that I will have a room that is inspected before and I will produce sample each time yeah no women OR MEN adam.levitan [1:21 PM] no cam girls either… no human interaction jonathan.bales [1:21 PM] I can watch porn right adam.levitan [1:21 PM] right jonathan.bales [1:22 PM] donuts will be standard glazed adam.levitan [1:22 PM] frosting? jonathan.bales [1:23 PM] krispy kreme glazed I thought was standard adam.levitan [1:23 PM] beers minimum 5% ABV? jonathan.bales [1:23 PM] no way….standard miller lite bud light whatever those are just under 5 arent they? adam.levitan [1:24 PM] coors light is like water, think it’s 4 jonathan.bales [1:24 PM] the other two main ones are 4.2 normal cans of lite beer adam.levitan [1:25 PM] no funnels? jonathan.bales [1:25 PM] 8 oz beers adam.levitan [1:25 PM] no shotgunning jonathan.bales [1:25 PM] no funnels, drink from can adam.levitan [1:25 PM] 8oz? you mean 12oz jonathan.bales [1:26 PM] yeah I guess whatever like a normal looking can is yeah 12 looked it up 6 miles in 66 min, has to be during day, unlimited breaks, 12 oz lite beers, krispy kreme glazed donuts, produce semen 12 times only other contingency I can think of is vomit adam.levitan [1:29 PM] OK i’ll give you 5-1 given the 66 minutes but you have to run between 9am and 6pm… if you sell more than 10k worth of additional potential winnin

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