Misc

Miscellaneous is often where the gems are.

Misc

The First Financial Engineer

  • Robert (Bob) Merton is a giant of modern finance science.
  • He is also, as argued by Andrew Lo in this really outstanding talk, the first financial engineer.
  • It is in this combination – being both a scientist and engineer that his true astounding contribution surfaces.
  • “I believe that a body of knowledge only becomes a science when a corresponding field of engineering emerges from it.”
Misc

Barry Diller – Learn to Unlearn

  • I have posted a few interviews with Diller before (here and here).
  • One of the best podcast interviews with the legend was done by Reid Hoffman.
  • It is in two parts – the first is called infinite learner and the second learn to unlearn.
  • Diller has an almost uncanny ability to change and adapt to a fluctuating world, something that has helped him stay on top for so many years.
Misc

Minsky Moments & Venture Capital

  • Minsky cycles are a concept that has seen its star rise since the financial crisis.
  • The idea, often summarised as “stability breeds instability”, is now incorporated into policy maker playbooks around the world.
  • This was a brilliant piece bringing the concept to venture.
  • “The key Minsky idea is that increasing capital inflows reduce perceived risk“.
  • Venture is going through this, driven by “shortening time” which boosts IRR, and the key question is whether true risk has actually decreased, or, we are in classic cycle.
Misc

100 ways to slightly improve your life

  • Nice fun piece from the Guardian on 100 ways to easily slightly improve one’s life.
  • Highlights include:
  • “If you’re going less than a mile, walk or cycle. About half of car journeys are under two miles, yet these create more pollution than longer journeys as the engine isn’t warmed up yet.“
  • “Don’t look at your phone at dinner.”
  • “Make a friend from a different generation.“
Misc

Perception vs. Reality

  • YouGov neatly demonstrate how Americans see small subgroups as much larger than they actually are, while large subgroups are systematically underestimated.
  • For example on average people thought that muslims made up 27% of Americans when the true proportion is 1% or that gays and lesbians made up 30%, when the true number is 3%.
  • On the other hand “we find that people underestimate the proportion of American adults who are Christian (estimate: 58%, true: 70%) and the proportion who have at least a high school degree (estimate: 65%, true: 89%).” 
  • Full results here.
Misc

Do Founders make good VCs?

  • Nearly 7% of venture capitalists (VCs) were previously founders.
  • This paper, using the VentureSource database, asks if this group is any good at investing?
  • Successful founder-VCs have investment success rates that are 6.5% higher than professional VCs.
  • If you are an unsuccessful founder-VC your investment success is actually 4% lower than professionals.
  • The reason isn’t down to deal quality but value add – “Using an instrumental variables approach to separate unobservable deal quality from value-add, we find that the outperformance of successful founder VCs is consistent with them adding more value post investment.“
Misc

Compounding

  • Compounding is very difficult for human minds to comprehend.
  • As the famous riddle goes:
  • “Imagine it’s 10:00 AM on a small pond with a single lily pad. If the number of lily pads on the pond doubles every minute, and the entire pond is full of lily pads by 11:00 AM, at what time is the pond half full of lily pads?“
  • The answer is here and many get this wrong.
  • Morgen Housel brings this up in his conversation with Tim Ferriss (worth a full listen) when he talks about Warren Buffett who’s real talent, when compared to other greats like Jim Simons, was not the level of investment returns (Simons’ are much higher) but their longevity. As he says “if Buffett had retired at age 60, like a normal person might, no one would’ve ever heard of him” (transcript).
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