Quote of the week: 

“Look for what you notice, but no one else sees.” — Rick Rubin


Satisfaction = haves divided by wants

I have come to believe that being a long-term investor is more than just a strategy or philosophy applied towards compounding capital. It’s a choice about how to live one’s life. Perhaps I’m stating the obvious, but time is the most crucial element to compounding. Learning how to increase one’s time on earth isn’t just about maximizing returns or the accumulation of wealth. It’s about learning to cultivate a long and meaningful life to enjoy the fruits of the endeavor. 

To that end, Arthur C. Brooks, the author and Harvard professor who studies happiness, explores this subject on a recent podcast with Tim Ferriss. It’s a great conversation to listen to on a long car ride or walk. For those interested, Brooks also writes a smart weekly column for The Atlantic on happiness, longevity, and meaning. “The truth of the matter is that lasting and stable satisfaction, which doesn’t wear off in a minute, comes when you understand that your satisfaction is your haves divided by your wants,” Arthur says in the podcast. “Haves divided by wants. That’s the model.”

“Happiness and its feelings are associated with three tangible phenomena in our lives that we can actually understand and manage: enjoyment, satisfaction, and meaning. Those are the three things that we need in balance and abundance. Think of these as the macronutrients of happiness, the protein, carbohydrates, and fat of happiness. If you don’t have protein and carbohydrates and fat in balance and abundance, all kinds of weird things are going to happen to you. And you’re not going to be as healthy as you should be, and you won’t feel good.”


What investors can learn from tennis players

In his latest memo, “Fewer Losers, or More Winners?” Howard Marks draws a clever analogy between tennis players and investors: Both need to take at least some risk to outperform over the long-term. Play too conservatively, and you’ll never outperform. Play too aggressively, and you’ll be taking on too much risk. “Tennis players have to take some risk if they hope to succeed,” Howard writes. “If none of your serves fall outside the service box, you’re probably serving too cautiously to win. The same is true of investing. As my long-time partner Sheldon Stone puts it, ‘If you don’t experience any defaults, you’re probably not taking enough credit risk.'” He continues:

“Understanding the distinction between risk control and risk avoidance is truly essential for investors. Risk avoidance basically consists of not doing anything where the outcome is uncertain and could be negative. And yet, at its heart, investing consists of bearing uncertainty in the pursuit of attractive returns. For this reason, risk avoidance usually equates to return avoidance. You can avoid risk by buying Treasury bills or putting your money into government-insured deposits, but there’s a reason why the returns on these are generally the lowest available in the investment world. Why should you be well paid for parting with your money for a while if you’re sure to get it back?”

A few more links I enjoyed:

“It may seem obvious that companies should be managed for the long term. Certainly, one does not often hear a CEO preaching about the virtues of short-term thinking. The unfortunate reality, that is discovered after investigating a wide variety of companies, is that most companies are run for the short-term. Management teams typically have 3-to-5-year contracts with leveraged financial incentives that cause an obsession with how the share price will react to strategy, cost, or short-term profitability. This makes it hard to plan and execute a long-term strategy. In such an environment it is also unrealistic to expect staff to commit to the long-term success of a business.”
“Their kid seemed ‘bred for the role of crypto exchange founder and CEO,’ as a fawning profile published by Sequoia Capital, one of FTX’s biggest investors, put it. The article, which attempted to explain why one of Silicon Valley’s most respected venture capital firms had chosen to give $150 million to a young man who was caught playing video games on his computer in the middle of an investor pitch meeting, offered two pieces of evidence in support of its assertion. The first was that Bankman-Fried worked briefly at a Wall Street trading firm. The second was that his parents were Stanford law professors.”

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