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19 Feb, 5 tweets, 2 min read
1/ If Congress or anyone else wants to actually understand what happened with GameStonk they should read Richard Zeckhauser.

Zeckhauser is not Schrödinger's cat. He is instead a Harvard Professor who actually understands uncertainty and risk. 25iq.com/2018/09/08/ris…
2/ Charlie Munger once said "The right way to think is how Zeckhauser plays bridge. It's just that simple."

Why not call Zeckhauser as a witness?

If you haven't read Zeckhauser's paper "Investing in the Unknown and Unknowable" you are a damn fool. citeseerx.ist.psu.edu/viewdoc/downlo…
3/ Assuming a five sigma event won't happen again in financial markets is both pretending and idiotic. It will be a triumph of hope over experience (and is a likely result).

If someone wants to find a workable way forward, start at the Santa Fe Institute.santafe.edu/news-center/ne…
4/ If a promoter says: "That risk is a five sigma event so don't worry."

Turn around quickly and run like the wind in a hurricane.

Actual risk reduction will require transparent circuit breakers and less leverage for participants who are not making decisions independently.
5/ What assumptions were broken in Robinhood's "five sigma" model?

Many participants in this market were connected by networks in ways that have never existed before. They were bored, grew up playing video games and do not make decisions independently. nytimes.com/2007/04/15/mag…

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Tren Griffin Profile picture
18 Feb
Charlie Munger:

"He said, 'Well, it’s a two-sigma event.' And then he said we were a three-sigma event. And then he said we were a four-sigma event. And he finally got up to six sigmas, better to add a sigma than change a theory, just because the evidence comes in differently."
The Munger citation from the previous tweet is from: jamesclear.com/great-speeches…

Nigel: "You see, most blokes will be trading stonks and options assuming 10 sigma. Where can you go from there? Nowhere. What we do, is if we need that extra push over the cliff, 11 Sigma. One higher."
3/ “The thing that really destroys people are what the academics would call six-sigma, or five-sigma, or seven-sigma events, which are things that are never supposed to happen, basically." Warren Buffett
Read 7 tweets
Tren Griffin Profile picture
14 Feb
1/ Being on the board of a business with Josh Wolfe fits perfectly with my goal of having experiences that result in great stories.

Watching a board member like Josh work is like watching a professional athlete. It's fun, interesting and educational. joincolossus.com/episodes/39195…
2/ This below is from the new podcast:

"Read voraciously, try to understand what the consensus is, find a variant perception, something that people aren't thinking about. And generally, for the wrong reason."

My blog post on Josh Wolfe is here: google.com/amp/s/25iq.com…
"I'm insatiably curious and I want to meet everybody. I want to know a little bit about everything, but it's a humbling thing because you just never know. We listen in boardrooms about the hard problems these companies might be solving, that's where the next thing comes from."
Read 6 tweets
Tren Griffin Profile picture
14 Feb
1/ "You Americans measure profitability by a ratio. There’s a problem with that. No banks accept deposits denominated in ratios. The way we measure profitability is in ‘tons of money’."

Morris Chang the founder of TSMC on CREAM (Cash Rules Everyning Around Me)
2/ "Americans use the return on assets ratio if cash is scarce. But if there is actually a lot of cash, then that is causing you to economize on something that is abundant.” Morris Chang
3/ Clayton Christensen: "Reducing assets is much easier than increasing revenue. If you become a semiconductor manufacturer without any factories, the New Church of Finance gives you high marks for profitability because your RONA is wonderful." google.com/amp/s/www.dese…
Read 5 tweets
Tren Griffin Profile picture
14 Feb
1/ It's almost as if the ability to creators to sell their products directly to consumers has forced platforms to find ways to better compensate them for their work. This is a shift in the share of the profit pool that is going to creators. Wholesale transfer pricing has changed.
2/ Take the example of @jasonzweigwsj or @danprimack negotiating compensation. Their current employer knows that Jason and Dan have the ability to sell their work directly to their customers through Substack, Revue or by rolling their own. Pricing power comes from a better BATNA.
3/ A better BATNA at its core is about opportunity costs of the people involved. I co-wrote a book to help you become better negotiator and improve the quality of your relationships. This book is available to read for free, which is priced to sell. 25iq.com/wp-content/upl…
Read 6 tweets
Tren Griffin Profile picture
13 Feb
Steve Jobs in 2004: “The more we look at it, for more and more consumer devices the core technology in them is going to be software. More and more they look like software in a box." reuters.com/article/busine…
"Why is Peloton making hardware at all if software/SaaS is so valuable? The one-word answer to this question is: distribution." google.com/amp/s/25iq.com…
"Why is Facebook making hardware at all if software/SaaS is so valuable? The one-word answer to this question is: distribution." mobile.reuters.com/article/amp/id…
Read 5 tweets
Tren Griffin Profile picture
13 Feb
1/ How many factors have changed since Buffett made this statement in 2001:
 
"The market value of all publicly traded securities as a % of the country's business--that is, as a percentage of GNP."
archive.fortune.com/magazines/fort…

Would Buffett still say that this is a useful metric?
2/ Charlie Munger: “You ask me what’s going to happen? Hell, I don’t know what’s going to happen. I regard it all as very weird. Anybody who is intelligent who is not confused doesn’t understand the situation very well. If you find it puzzling, your brain is working correctly.”
3/ "I don’t think price-book ratios, price-sales ratios — there’s no single metric that will tell you this is a great time to buy stocks or not to buy stocks. It just isn’t that easy." WB buffett.cnbc.com/video/2002/05/…

Munger: “There isn’t a single formula. There's no magic system."
Read 4 tweets

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