Learning To Appreciate Learning

In the past few weeks about 5-10 people have reached out to ask me for advice in the vein of “my kid is 6 and likes math and what should I put in front of them to foster this”. They are usually looking for specific answers.

I offer a few things my kids have enjoyed (everything can be found on the blog, ie here and here) but I want to be clear — I’m no expert. I’m just like the rest of the parents who have the same goal of watching their kids’ curiosity flourish.

To kill many birds with one stone here’s the gist of my email responses:

I don’t create pressure. Let learning be a source of joy. Insight is its own reward and to train someone to appreciate that when they are young is a life-long gift because they can find stimulation in the pleasures of the mind and the mundane.

Sure, math proficiency has plenty of instrumental value in life, but appreciation and beauty is the bigger gift here (I also suspect this is an antidote to the doping that broader media does to people — if you find beauty in the evergreen you don’t need to constantly be taking drags from the current times and you’re perspective and emotional state will be better off for it. No science behind that — just my hunch).

You are already doing the single largest muscle movement –> literally giving a shit about your kids’ curiosity flourishing. Like seriously that’s 90%. The specific instances of expression — coding, writing, drawing, cooking, composing — or any other forms of creation are secondary. Creating not just consuming is the key because by being able to manipulate the world (I don’t mean manipulate in some evil sense) around you, you reinforce your agency.

When I see fear and extreme tribalism I see people retreating away from agency and frankly accepting some learned helplessness. Your role as a guardian is to shepherd a healthy sense of agency (unhealthy would be to program an overconfident narcissist).

Code and writing are symbol-manipulative domains — some will gravitate to that more than say carpentry or being a physical maker. I’d be open-minded about the specific expression and focus on nurturing the upstream creation and play impulses.

And if you got this far you exemplify an ironic phenomenon — the people who reach out looking for help/guidance/opinion/validation on their approaches are the people who don’t need to (this is not a back-handed way of saying don’t reach out btw, it’s just an observation!)

This young portal in the Moontower codex is an attempt to consolidate some specific learning stuff if interested:

🧠Moontower Brain Plug-In

Reading As A Magical Power

Something I recently started doing that might be of interest to parents:

I’m reading “Journey to the Center of the Earth” by Jules Verne to my almost 7-year-old.

Written in the 1800s, the writing style is challenging.

So I read a bit, then I “translate” it into a more natural language for him. I’ve explained to him that if he reads the books he’s able to read and I read this book to him (instead of him trying to read it himself, which he was trying to do, but I have zero confidence he’s understanding), the combination will give him “magic.” I try to create some mystique around reading because I want him to think reading gives him special powers. Because that’s a fun thing to think, of course (and we probably should think about more things in such ways because it helps us notice the joy in being alive and stuff).

One of the chapters ended in a particularly suspenseful way. And I tried to explain the concept of suspense to him (to his and his teacher’s credit, he mentioned that when they read in school, they pause to try to predict what will happen next in the story).

So with the idea of suspense established, I just asked him to come up with suspenseful sentences. I’ve never asked him to do that, and he didn’t reply with anything substantive, but that’s okay, whatever… (I did give him an example: “The boy thought he locked the door, but then he saw the knob turn,” and my son goes, “that would freak me out,” and since this was just before bed, I felt a bit guilty..oops)

Just sharing for other parents’ benefit, I think we all want to find ways to show the joy of reading and wanted to start showing him “techniques,” a word I asked Alexa to define for him. So he can identify the author’s “weapons” and so maybe one day he can use them when he writes.

Bootstrapping Agency

In Wednesday’s Munchies, I pointed you to Venkatesh Rao’s brain-expanding interview on Infinite Loops. One view I’m still marinating on is how finding a sense of meaning is not “a matter of spiritual retreats and going on soul-searching journeys and having shamans take you on ayahuasca retreats and things like that. It’s not about that at all. It’s the first time you come to a hard decision in your career or life, make the hard decision, see how good you are at making tough calls, and then keep doing that and meaning-making will take care of itself.”

To call meaning-making essential is not stepping out on a limb, unless you’re a nihilist.

Rao makes a bolder claim — looking for meaning is “intensely practical.”

A lot of people don’t get this. If you look at conversations about meaning-making in the abstract…listening to podcasters and getting radicalized, that level of conversation about the meaning crisis, it seems like a philosophical spiritual problem that should be addressed with religion and philosophy, ideas and so forth. It’s not. It’s really as simple as meaning-making is unlocked when you first learn to take courageous decisions and keep doing that, so it becomes a habit.

Connecting dots…when meaning-making is unlocked what actually changes for you?

You acquire an earned sense of agency as opposed to the illusion of agency that “tragic luck” furnishes. This requires being rugged now and again. Any rugging worth a lesson, means you took a real risk.

And I think yes, that is a learnable, teachable skill, but it’s one that the industrial environment with schooling and the paycheck world is actually anti-optimized for. It’s designed to teach you exactly the opposite of that. It’s designed to take you from an naive starting point and keep you tragically lucky for the rest of your life. And if they fail at it, you’re tossed by the wayside. That’s what the industrial world is set up to do, make you tragically lucky or throw you into the garbage heap.

Rao, coming around the bend with the baton, is arguing that our sense of agency is stunted by an institutionally enforced “narrow band of risk”. When I rummage through my feelings about education I come to a similar conclusion — the purpose of education is to bootstrap a sense of agency.

I’ll let one of my favorite education writers Matt Bateman take the baton for the last leg.

From Vocational Training For The Soul:

In the 20th century, there are two distinct rationales for education: vocational and characterological. Putting aside how well education actually does at getting you a better job or helping you become a better person or citizen, the idea is that the core of schooling should do both.

The most obvious place to look for the economic upside of an education is in the three Rs: writing, reading, and math. There are questions as to whether the specific math that students learn is optimally practical—should it instead emphasize, say, statistics, or personal finance, or maybe even spreadsheets?—literacy and numeracy are deployed throughout the economy and do indeed comprise an unambiguously useful part of education.

Literature, history, and the arts all fall under the heading of soulcraft. Even science, the practical driver of the modern world, is not that useful as you learn it in school. A small minority of students deploy their scientific knowledge in their careers, and those that do get specialized training far beyond what you get in K-12. These things are meant to prepare you for appreciation of or participation in the human project in a non-vocational way.

These divisions are very much alive today, as people struggle to find a coherent view of what our largely dysfunctional education system is supposed to accomplish. Some criticize education for not providing more economic upside, arguing for a more practical education, shorn of classical trappings. Others defend the humanistic value of education and argue that we should spend more time on non-economic upsides. This debate cuts across K-12, higher education, and even early childhood education.

Is there a way to transcend these divisions? Is there a way to get a handle on the vocational value of education that integrates its humanistic elements, rather than downplaying or siloing them?

It is commonplace today for a person to be profoundly alienated from the entire domain of work. This is not a Marxist critique about owning one’s labor, nor an aristocratic pining for a life of leisure. It is an observation that, for many people, work is a source of bitterness, not dignity. A seemingly small subset of people find meaning in work, and the rest fail to “find their passion”—a notion that is likely part of the problem—or simply resent work in a more general way.

While we still speak here and there of the value of a work ethic, the “ethic” part of this is, for us, obscure. We do not naturally see one’s personal relationship to work as a major moral issue. But it is one: the people who manage to find meaning in work are not the lucky few who land the good jobs, but the good who manage to build their souls in a certain way.

Education should offer more general value than the skills acquired on the job or in vocational training—but that general value, the soulcraft aspect of education, is not vocationally inert. It can and should nurture the beliefs and virtues associated with a life of work.

Bateman goes on to explain 4 practical ways to nurture such soulcraft. My favorite animates knowledge by linking it to actual humans. This is important (in my opinion) because without narrative disjointed ideas might as well be trivia.

  • The content of education should place more emphasis on the biographies that underlie it. There is no item of knowledge in education that is not the result of the work of some past human.

My second favorite:

  • We should allow opportunities for real work where possible. This is especially true of older adolescents, who can get jobs—from the entry-level to technical, depending on the teen’s skills and circumstances. But scaffolded opportunities can be provided for younger adolescents and elementary students to experience the reality, even the economic reality of work.

The inert child who never worked with his hands, who never had the feeling of being useful and capable of effort, who never found by experience that to live means living socially, and that to think and to create means to make use of a harmony of souls; this type of child… will become pessimistic and melancholy and will seek on the surface of vanity the compensation for a lost paradise.

And thus, a lessened man, he will appear at the gates of the university. And to ask for what? To ask for a profession that will render him capable of making his home in a society in which he is a stranger and which is indifferent to him. He will enter into a society to take part in the functioning of a civilization for which he lacks all feeling.

Maria Montessori


I used an air fryer this week. My family was proud of me.

The bar is that low. I mean look what happened that time Yinh and my MIL weren’t around:

I’m also not handy. This utter lack of domestic skills means the very sight of a Conestoga wagon gives me chills. It might as well be the trailer for Hereditary. (I also don’t watch scary movies…but I am an avid reader of their Wikipedias.)

So now that we have this family commune thing going on with my in-laws next door, I feel extra pressure to pull my weight. I really only have 2 things going for me:

  1. I enjoy making cocktails. The others enjoy drinking them. (Lately, I’ve been making mai-tais but instead of white rum, I’m using blanco tequila.)
  2. I have the patience of a cadaver. (I’m also a space cadet that will not have his boarding pass out after waiting on a long line to get to the agent — I don’t know if this is the downside to my hard-to-rile disposition but I’ve definitely annoyed my share of people in life and the worst part is this same quality makes their annoyance roll off me too easily.)

The benefit of patience is that if I try to teach something and the person can’t get it — it’s always my fault in my mind. There has to be a way. So I get the privilege of trying to help the kids with their schoolwork and can usually do it in a way that doesn’t make them snap at me when they are frustrated. Not always but I am conscious of not taking them to a place where they shut down. As any parent knows, kids put up walls and they are often only permeable to a 3rd party. (I’m not a fan of tough love unless the kid is making careless errors. Give kids credit and space and recognize that sleep helps minds consolidate. You can drill a piano scale without a sense of progress only to find that it’s easier in the morning. Patience allows breaks to do their unconscious work, but you need to trust it. Persistence and rest are a powerful combo but don’t mix well with immediacy.)

I love that moment when a kid (or anyone really) discovers they can do or understand something that felt too big. The feeling of empowerment unlocks far more than the particular lesson’s objective.

With all that said, I create lessons to challenge them. You can meet them wherever they’re at by breaking problems into smaller bites and inserting them at the point where they feel most comfortable.

I published these math word problems with guidance for how to teach your child or student.

Similar posts I’ve previously published:

This one started as a kid lesson but turned into something about portfolio risk:

I have several lessons in the queue. After doing them with my kids and their cousins I’ll write ‘em up and share.

In the meantime, there are more posts indexed here:

These are more teen/adult appropriate:

Go slow and give people credit. Many people never had someone help them see they are capable.

Now if I would just direct this advice to myself in an apron…

Sal Khan On The Finding Mastery Podcast

My personal notes from Sal Khan’s interview with Michael Gervais on the Finding Mastery podcast.

Link: https://findingmastery.net/sal-khan/

How did Sal mentally manage the risk of non-venture backed entrepreneurship?

Early on in the Khan Academy journey, even when, let’s go back to 2004 2005, I started tutoring my cousin’s 2005, I started writing software for them. That’s when I got the domain name Khan Academy. And I started writing software for my cousins. And I said, “Hey, if it’s just my cousins who are using it, it’s worth doing this, it’s helping them”. But obviously, as you start writing software you’re like, but maybe people who are not my cousins could use it. But I kept trying to keep myself from getting too attached to the big ambition, just saying, hey, just put one foot in front of the other, but keep the door open to the big ambition. I didn’t want to close that door either…

Even before I had quit my job, I would show my friends, “Hey, I’ve got this hobby. I’m tutoring my cousins.” My friends, out here in Silicon Valley, their natural inclination is “why are you doing this?” And I’m like, “oh, because it’s helping my cousins.” They’d ask, “How are you going to monetize this? I don’t see the business plan. Someone else’s is doing what you’re doing.”

I’m like, no, no, no, this isn’t a business. This isn’t anything. I’m doing it because it’s helping my cousins. And hey, if it helps other people, great. So that was one form of protection.

Dealing with cynics — who do you need to convince and what evidence do you hold?

Even today, when I encounter cynics, the first thing I say is, “Sal, don’t be defensive, there might be something in what they’re saying”. You don’t want to be delusional and ignore good feedback. But at the same time, you also have to remind yourself: you don’t have to convince this person.

We always want to impress our friends and convince them that what we’re doing is a good idea. But I don’t have to convince them. That’s the first somewhat liberating thing. And then what made me not question myself too much, I said, “Okay, so what evidence do you have?” This is a friend who’s smart, I respect their opinion, but what evidence do I have?

Well, I did transform several of my cousins’ lives. I was already getting letters from people who I didn’t know around the world about how it had transformed them in some way, shape, or form or their children.

Look, my well-intentioned friend is probably trying to save me from “wasting time” or getting distracted, but they haven’t even tried it out. They just did classic MBA-type thinking of “Well, I heard some other companies are making educational videos and doing software that creates questions. You’re like the 10th person to do this, so what makes you think…”. That’s their natural, competitive analysis type of thing.

I think there’s probably a lot of people who want to do entrepreneurial things. And when they meet a friend who’s doing something entrepreneurial, part of their brain wants to help the friend and wants to be constructive for the friend, part of their brain wants to help their friend. If they think their friend is going down the wrong angle, maybe protecting them from that a little bit. But some of it is also protecting their choices. “I’ve always wanted to be an entrepreneur, but I’ve been afraid to and now my friend is doing it…maybe it’s comfortable if I convince him to stop doing it, and do what I’m doing.”

The main thing is just what just keep reminding yourself, “Why are you doing it? What gives you confidence?” And remembering “Who do you really need to convince? And who do you not really have to convince?”

Where did Sal learn to focus on evidence and focusing on who he needed to convince?

He lightly responds: Probably is a coping mechanism for a bunch of things that happen in life…I’ve been described by even some of our early board members as a “pleaser”. Like I want people to say, “Good job.” [Me: Oh man, this hits hard]

I think I realized in my life you’re never going to win trying to please everybody. Trying to convince people, getting defensive about things, you just don’t feel good about yourself. 

I’m still working on it. I have a lot of ideas. I do try to share them with people who I really respect. And when they immediately get in the devil’s advocate position or the cynical side, I do get a little defensive if I’m honest. But I I’ve been working on myself.  “Okay, I don’t have to convince them, there’s probably some truth in what they’re saying, I should process it.”

And you know, also some of it’s on me. I realized that when I get excited about an idea, I go into “sell mode” almost immediately, like “this is all the reasons why it’s good, isn’t this exciting?…” And that almost automatically puts people into that devil’s advocate position. “But what about this? What about that?” And so now when I introduce ideas, I’m going against my stereotype, where I’m showing that I’m also looking at the risks and how this could go wrong.

Half the time, the next morning, I wake up, I’m like, “Yeah, they were kind of right.” But sometimes I’m like, “No, I still have evidence that this was worth this is worth pursuing.”

How did Sal frame the decision to leave the hedge fund path to start Khan Academy?

There were some basic mechanical, left-brain considerations.

Did I save up enough money?  I was an analyst at a hedge fund, I wasn’t a hedge fund manager. So I was able to save up some money, essentially a healthy downpayment for our house in Silicon Valley. We were saving up for, you know, several hundreds of thousands of dollars not like independently wealthy money. We don’t have big expenses. My wife and I grew up quite poor so we know how to economize.  That was a mechanical thing.

Even more was the opportunity cost of the [hedge fund] career. Every year your income is accelerating. In five or six years, I could be making what my boss was making,  what could have been in the millions of dollars every year. And that’s a real big opportunity cost to give up for something that’s unproven. That’s where a little bit of the heart came in. I just told myself “Well, what is the life that you want? And the life that I want is a healthy, happy family. But I really told myself, if I had a nice 2000 square foot house, which was the house that we were renting, and we later were able to buy — a four bedroom house with you know two cars in the driveway. We’re able to go on vacations, go to restaurants every now and I’m able to support my kids through college. That’s all I want, financially, really. And if I’m able to do that then also get to work on something that, every morning, I wake up and I’m inspired to work on, I get to work on an interesting problem, and I feel like I have a sense of purpose then I consider myself the luckiest person on the planet. I’m not saying this now just to sound you know anything, that’s literally what I told myself. I’m like, if you are able to have that lifestyle, that’s a really good life. And so that liberated me a little bit from the golden handcuffs.

A lot of times when I’m making some of these decisions like even “what Khan Academy should be” I do go a little bit into what inspires me. We have one life to live. If you have a shot of being able to live your life as a protagonist in a movie, live your life as a protagonist in a science fiction book, go for it! [Me: this is the type of thinking that doesn’t show up in a spreadsheet. This is an example of how “accounting” fails us…not everything that matters can be measured and vice versa]

He fills in the details:

Even in the early days, there were a lot of VCs who reached out who wanted to write a check and Khan Academy be a for-profit, and it was tempting. But then when we start talking about monetization, and how you’re going to exit and all that I was like, “Oh, this isn’t what I want to do I want to”

Then I thought about what is the homerun is for a for-profit. And then what’s a homerun for a non-profit. A homerun for a for-profit, we all know those stories quite well. But I was also thinking, “How’s it going to change the world? And how’s that going to change me?”

And then I thought about a home run as a non-profit. I’m like, “What if Khan Academy can be the next Smithsonian, the next Oxford, or the next, whatever. In some ways, it’s bigger than all of those because even in 2009, when I was thinking about these things, it had bigger reach than some of these hundreds-of-year-old institutions. And we were, there’s no reason why we couldn’t grow another 100 fold or not 1000 fold from there. So for me, it was like, “Wow, maybe it’s worth swinging for the even higher fence.” That’s a hard thing. The head kicks in and says, “Okay, is that at all reasonable?” And as ridiculous as it sounds, it isn’t unreasonable. If you just extrapolate the growth, if you just look at what Internet technologies allow us to do, if you just think about the scale of other people on the internet, for the most part for-profits…Google scale would have seemed like science fiction 30 years ago for what it does. But it’s not. And so couldn’t Khan Academy be that same thing, but as a social institution?

Did he share this thinking with others?

Going back to our earlier, I’ve realized that there’s certain contexts where you’re this type of conversation is going to be welcome. But the conversations where I’m talking to my friend who’s talking about how you’re going to monetize this, he’s not going to be in a headspace where I’m like, Well, what do you really want out of your life? And what do I really want in my life?

And do I need his approval for me to be able to do it? Now, I did talk about this with my wife, and I kind of do need her approval because this is “how do we want to live our life”.

Healthy and unhealthy “imposter syndrome”

I think some of that impostor syndrome, I actually want to retain. I never want to forget how, like, there, there was a time not too long ago that I would pass on the organic produce. I think it lets you just appreciate the world a little bit. And we all know about hedonic adaptation and the hedonic treadmill. I don’t claim that I’m immune so I don’t want to sound like I’m some guru here. I live in Silicon Valley. We live in that same house, and a lot of our friends have now moved into houses that are multiple of the size of our house. Every now and then it’s “maybe it would be nice to have two saunas.” But I always remind myself, “well imagine their electricity bill, or like, the gardening bill or the water bill or whatever.” But, yeah, I think it’s healthy imposter syndrome.

A healthy one keeps you grounded, allows you to enjoy it a little bit. Like every now and then I get invited to meetings with people or conferences with people, where both healthy and unhealthy impostor syndrome could be at play. The healthy imposter syndrome says  “Wow, you get to meet your childhood hero, or someone that you thought you could only read books about, and you’re meeting this person, and they are interested in what you have to say, and they’re supporting Khan Academy.” That’s kind of fun. I don’t know if that’s impostor syndrome, or that’s just remembering yourself when you’re younger. And you’re like, “Wow, how is little Sal in this meeting right now? That’s kind of wild.”

The little less healthy imposter syndrome is that if that goes to an extreme, where like there’s a discussion and I’m like “Who am I to say something?”

There, I try to remind myself that everyone here is literally just a person, like everyone here. And that’s another, I guess, coping mechanism. I just treat everyone as if they’re my childhood friend. And there’s something of a self-fulfilling prophecy there as long you’re respectful. Some people who have been great supporters of Khan Academy are household names — I’m gonna treat them as my friend. And I think they appreciate that too, because so many other people treat them with such reverence, and I respect them a ton, but I get to joke around with them a little bit. And that’s how I deal with that other potential imposter syndrome.

A resonant story: college can give you a safe space to explore things you have suppressed because you grew up perhaps in a narrow place

MIT was like heaven for me. I think when you are in high school in a fairly mainstream high school, you have to suppress certain instincts. You have to suppress how much you get excited about learning certain things so you don’t get beat up, you don’t get ostracized.

Why Sal wanted to dedicate himself to education

  1. First, I’ve always enjoyed teaching. Multiple times in my life, either informally, even when I was very young, I found that I had a knack for it. In a lot of cases where a classmate might be struggling to understand what’s in a textbook or a teacher,  and I’m like, “Oh, this is how I think about it”. And my friend was like, “Oh, man, that’s so cool. Yeah, that makes all the sense in the world”. I guess I have a knack for this thing. So that kind of built confidence in my ability to do that. [Me: importance of knowing yourself in helping determine what you should be doing!]I was the president of the math club and one of the things we did was math tutoring.  We created such a legitimate program that the school then made it a formal part of the school. It made anyone who had below a certain grade in any of their math classes go to this math tutoring, that I was essentially running with a bunch of other students who are in this club. And I saw time and time again, a lot of students who were struggling, barely passing a course, or thought they hated math, if they just had the opportunity, the incentive to fill in gaps, had things explained to them the right way, a chance to practice, they were off to the races. Some of them joined the math Honor Society. A month ago, they were about to fail their algebra class, and now they’re going to math competitions with us, because they started to get excited about it. So that also gave me confidence.And that’s all about mastery learning. The opportunity, incentive to fill in any gaps to finish any unfinished learning.
  2. The other thread is I think every young person who’s even vaguely idealistic, and I think this is all young people, look at the world and say, “Oh, there’s so many problems in the world. How do you solve it?” You think about climate, you think about inequality, think about whatever you pick, you pick the issue. Conflicts, when you really keep peeling the onion, it’s just what’s going on in people’s heads. Everything else is almost just a side effect of what’s going on in people’s heads. Okay, so then we got to change what goes on inside people’s heads or improve or remodeler? Well, what does that? Education. Education is the single highest leverage point.

A quote pulled from Sal’s writing:

If you believe in trying to make the best of the finite number of years we have on this planet, while not making anyone worse think that pride and self righteousness are the cause of most conflict and negativity, and are humbled by the vastness and mystery of the universe, then I’m the same religion as you.

What is the state of education today?

The good news

If I compare the State of the Union of education to what it was 250 years ago, it’s awesome. 250 years ago, even in more literate countries, 30-40% of the of the population was functionally illiterate. Free public school, or at least a high-quality public school was not a mainstream thing as recent as even 30, 40 or 50 years ago. Because of things like segregation even in places like the US, you did not have respectable access to education. I think it’s still not perfect, and there’s still a lot of inequality but for the most literacy rates are much, much better than they were for most of human history. Even in the last 10 years, as I’ve been on this journey, things like access to technology, to the internet, to high-quality instructional materials, etc. That’s all actually gotten better, even in the last 15 years.

The bad news

Even in affluent neighborhoods or fancy prep schools, you still have a model where a lot of kids are still falling through the cracks. And those are the places where they’re not resource-constrained. Imagine in the places where they are resource constrained. I mean, there are still schools, my school in fact, which is a suburb of New Orleans which was pretty mainstream, it wasn’t a gold-plated school by any stretch of the imagination. It was a normal Louisiana public school. But I remember even when I was growing up, there were schools in New Orleans and kind of urban corridors that didn’t have air conditioning. Can you imagine not having air conditioning in New Orleans?

The disappointing news

Let’s just assume that you have all the resources…the model of education is not mastery-based. Kids are moved ahead at a fixed pace. They cover some material, they get a test, some kids get 100 on it, some kids get a 90, some kids get a 70 on it, even though that student didn’t know 30% of the material that happened to be on the test, the whole class will move on to the next concept, and then build on those gaps. And then the next concepts are going to be that much harder to learn. And then those gaps just keep accumulating. [Me: In my own tutoring I see this at the elementary level. Kids that are 2 to 3 grades behind. There’s no concept of being left back. Just push them through the system]
At some point, kids hit a wall. It hits their self-esteem, they’re not able to move any further. And this isn’t theoretical, you just look at the graduates of a fancy prep school, it’s happening. It’s definitely happening on a nationwide basis. So I think that is the biggest problem.

60% of kids who to 2-year colleges and about 30% of the kids who go to 4-year colleges (and college-bound kids are in the top half of already) exhibit giant gaps in learning, many unable to learn algebra yet — a 9th grade course. The majority of kids attending college would need to go back to middle school-level learning to fill in gaps.

On American universities

American higher education is the envy of the world. Our research is the best in the world.  American universities have very nice facilities, and they have very nice programs. So what are the problems?

  1. They’re very expensive. Partially because of the landscaping and the facilities and the programs that they have.
  2. They can be very rigid. What’s magical about four years, whether you’re gonna be a software engineer, or art historian? It’s always 4 years. Clearly no one has said “Let me just work on the stuff that you need to learn. And not just to learn to be that career, but like learn to be a human being or participate in democracy.” The opportunity cost isn’t just in dollars, although those are significant. It’s also in lost time, the fact that in the US to become a working doctor, and I observed this with my wife, and she’s not even a surgeon,  You have to keep going even as a rheumatologist. She was 32 before she was really a rheumatologist and she never took a break since kindergarten. You’re losing a lot of talent that could help serve a more diverse community because they were the ones that said, “Hey, I gotta get a job fast. I can’t sit in school until I’m 32 years old, or 35 years old to become a surgeon or a professor or whatever else.” Those are the problems that I think we need to address.

On the stress of college admissions

I actually think our system is culturally broken in a lot of ways. There’s always been a Lord of the Flies aspect. I remember reading that book in middle school, I’m like, okay, yeah, you just described the locker room or the playground — bully or be bullied. Unfortunately, it’s part of the culture and in many cases, it happens more in some of the more affluent neighborhoods, the stress and anxiety. Here in Silicon Valley, Palo Alto, I can’t afford to live in those neighborhoods that go into those high schools — they have the highest suicide rates in the country. I talk to educators there. The stress, the anxiety, the depression, there is off the charts. So that’s another thing. Talk to anyone in higher education. Roughly a third of all students are in some way dealing with some of these things. 

What is the university tuition actually buying?

Universities study everything, except some very obvious questions, like what you just asked, “What are you paying for?”You can conduct a very simple study here. Go to the upcoming Harvard graduation, and go to some kids who have some debt, “Hey, graduate, I will pay your $200,000 right now, whatever, however much debt you have, you get to keep all the knowledge you got from Harvard and all of the experiences, but you can never tell anyone that you went to Harvard University, will you take it?” I’m guessing very few people will.

On the other hand, if I were to go to a lot of people, and say, “You can pay $200,000 right now and the whole world will think that you have gone to Harvard for the rest of your life. There’s no way of proving it. You get no new knowledge.” A lot of people will take you up on that. So I think that tells you something about what people might be paying for.

I do think there are other things. Like if I offer you $200,000 but all your memories of the great conversations and friendships go away. That also would be hard for people to take. And look, I think the knowledge matters as well. But I do think the credential and the brand and the halo is a big, big, big piece of it. You absolutely can learn some of the more tangible skills at a lower cost alternative or even online.

And for the experiential, maybe the less tangible skills. You also could learn in other ways.  Some people say, “Oh, well, it’s just an important coming-of-age experience, you learn how to learn.” I don’t disagree with that. That happened to me in college. I had a great college experience. I met some of the best friends in my life, I met my wife in college. But I could imagine other coming-of-age experiences that are just as powerful. The military is one. I could imagine traveling through Europe with a cohort of students while we get jobs while we do online learning at the same time. I imagine doing internships and co-ops I’m learning, whether it’s in person or online, and getting work experience. And if I’m able to have a cohort of people my own age, that could be a great coming-of-age experience.

A not-so-great coming-of-age experience that I’ve seen happen, including people in my own family, is you have this great experience, and then you hit reality. You’re 21 years old, you’re no longer living on the well-groomed Country Club of a fancy university you attended. You have $200,000 of debt or more. You realize that in that economic seminar at the Ivy League school they treat you like you’re going to be the Federal Reserve Chairman but that’s not how the world is treating you now. You’re having trouble getting that job in economics. And if you do, it’s not paying you enough to pontificate about interest rates. We have to think a little bit more holistically outside of even just those four years.

Sal’s desire for Khan Academy

We have all the components for school in the cloud so to speak (via Khan, sister orgs and partners, through schoolhouse.world, a free online tutoring initiative) but I don’t think we’re going to be a mainstream use-case. 

I’m doing what I’m doing because I want the whole world to change. I want the people who have access to school for that school to be that much better and personalized. I want for kids not to fall through the cracks and all the associated stress and mental health issues and self-esteem issues. I also want Khan Academy and the related organizations to be like the shadow school system, the strategic education reserve, the shadow safety net, for the world, where if you don’t have school, if your school is crappy, you have, you have a safety net.

Personal resonance and reflection on Sal’s takes

  • When you take risks, cynics will be constant. Sometimes they will be right and sometimes not. But you need to focus on 2 things:
    1. Who do I actually need to convince?
    2. What evidence do I possess that says the risk is worthwhile?
  • When making a decision separate what you need from what you think you want. Then don’t be afraid to chase what inspires you (”a protagonist in your own movie”). I think of it as shedding to build.
  • Imposter syndrome can keep you grounded
  • Sal’s north star is personalized mastery learning because it increases self-esteem and well-being. It’s the maximum leverage point because our largest problems and conflicts stem from what’s in our minds. This is highly adjacent to my own “agency” argument.
  • Sal is courageous because he is trying to demonstrate that there can be a better way. He is consciously trying to be a role model through his actions and while I understand that many believe this is nudgy or righteous thinking I have argued the same point. We are suffering from a lack of healthy models and have settled into a forest of Molochian equilibriums. The “lord of the flies” broken culture around college admissions Sal uses is but a metaphor for what I see everywhere — the type of competition that is unhealthy and eats its own competitors. The people who feel on top now cannot outrun it. If it doesn’t eat them, it will eat their children.

Skynet’s Already A Better Dad Than Me

Let’s start with a math puzzle from Martin Gardner’s Entertaining Mathematical Puzzles:


A silver prospector was unable to pay his March rent in advance. He owned a bar of pure silver, 31 inches long, so he made the following arrangement with his landlady. He would cut the bar into smaller pieces. On the first day of March, he would give the lady an inch of the bar, and on each succeeding day he would add another inch to her amount of silver. She would keep this silver as security. At the end of the month, when the prospector expected to be able to pay his rent in full, she would return the pieces to him.

March has 31 days, so one way to cut the bar would be to cut it into 31 sections, each an inch long. But since it required considerable labor to cut the bar, the prospector wished to carry out his agreement with the fewest possible number of pieces. For example, he might give the lady an inch on the first day, another inch on the second day, then on the third day he could take back the two pieces and give her a solid 3- inch section.

Assuming that portions of the bar are traded back and forth in this fashion, see if you can determine the smallest number of pieces into which the prospector needs to cut his silver bar.

Don’t read further unless you want the solution.

This is the solution:

The prospector can keep his agreement by cutting his 31-inch silver bar into as few as five sections with lengths of 1, 2, 4, 8, and 16 inches.

You’ll note that you can sum to any length up to 31 with that set of bars.

Disclosure: I read this problem aloud to my kids on Wednesday night at bedtime and none of us got the answer.

The key to this problem is it can be expressed cleanly using binary or a base-2 number system instead of using the base-10 system we are used to.

Earlier that afternoon I taught Zak (9) how to count in binary. I made these charts to summarize how I explained it to him.

It’s useful to remember that when you hear “tens place” what is really meant is the [symbol occupying that space] x 10¹

  • In base-10: there’s a one’s place, tens place, hundreds place…
  • In binary: there’s a one’s place, twos place, fours place, eights place…

Once Zak understood this he could represent our family members’ ages in binary. I had him do the same thing using base-8 by following the same pattern.

  • In base-8: there’s a one’s place, eights place, sixty-fours place, five hundred and twelve place…

So representing my age of 44 in base-8 = 54 because there are 5 eights + 4 ones.

Computers do calculations in binary because electrical signals on a chip are either on or off. So representing numbers can be thought of like a morse code of “on”/”off” at light speed or something. Feel free to correct me, that’s my armchair impression.

Now a brutal coincidence.

Despite teaching binary that afternoon, I did not recognize it was the key to answering the riddle! Zak was flabbergasted by the coincidence that the solution was in “what’s that word you keep saying…binary?” after he just learned it. Baader-Meinhoff on steroids. (It was really cute that he kept shaking his head about the coincidence that the thing he just learned showed up in a random problem I chose that night. The coincidence hit him just as hard, maybe even harder, than it did me.)

The silver bars cut into 5 lengths as a binary solution:

This is all about to get better (or worse depending on what temperature you run at on the techno-optimism thermometer).

Yesterday, I started tinkering with OpenAI’s recently released ChatGPT. I found this concise description of ChatGPT:

A large language model trained by OpenAI is a machine learning model that has been trained on a large dataset of natural language text, typically using a deep learning approach. This allows the model to learn the patterns and structures of human language and to generate text that is similar in style and content to human-generated text.

You can sign-up to try it for yourself here.

This is a Twitter thread of prompts I’ve given it and its responses. Everything from a Kelly Betting problem to imagining if DMX wrote the hook for No Scrubs.

I also gave the bot a condensed version of the riddle.

Prompt: If I have a 31 inch silver bar but I need to make the minimum number of cuts so I can create a new bar any length up to 31 inches, how many cuts do I need?

It responded:

To create a bar of any length up to 31 inches, you would need to make five cuts to your silver bar. This is because the minimum number of cuts required to create a bar of any length up to a given length is equal to the log base 2 of that length, rounded up to the nearest whole number. In this case, the log base 2 of 31 is 4.8, which rounds up to 5. Therefore, you would need to make five cuts to your silver bar to create a new bar of any length up to 31 inches.

“log base 2”?! It knew it was a problem for binary.

Lacking the vision to peer around corners, my small mind can only see the 6 inches in front of my face. And I can see turning to ChatGPT over Google for many types of searches. But with the explosion of “generative AI” in the past year (GPT engines, Dall-E, Stable Diffusion or Midjourney for images), it’s clear the times they are a-changin’

A Drawer Of Curiosities

One of my deepest held beliefs is that our need for coherence is a profound source of misery. We agitate for universal theories to tie everything together. Our obsessions with gurus, religion, ideology, macro, or even astrology are symptoms. We search for meaning as if it is something that’s “out there” to be discovered. I’m not holding my breath. And I believe the quest is actively destructive when taken too seriously. When people become overly invested in any of these expeditions, they will protect their egos at any cost. It’s actually more insidious than this. They dehumanize opposition so they don’t even have to consider their plight a cost.

I just picked up Simone de Beauvoir’s book The Ethics Of Ambiguity because its description vibrates with my own feelings. I’ll report back after reading it.  (See How The Need For Coherence Drives Us Mad to see if you’d be interested in reading it.)

In the meantime, I’ll share a technique that I use to resist the seduction of coherence.

A Drawer Of Curiosities

In my notes, I keep an ever-growing list of “tensions” and “paradoxes” that I encounter from reading or experience. It is a constant reminder that every bit of advice you’ve ever heard is not universal. My buddy Jake likes to say that seat belts are the only free lunch. To which I respond, “unless the presumption of safety encourages drivers to speed or drive more recklessly”. Let’s be blunt. My response is utter ankle-biting tediousness (if you have this kind of thought, don’t make it a personality). The larger takeaway is there are paradoxes running loose everywhere and if we run around trying to corral them with some ill-conceived notion that it makes us “more right” or there are truths we can somehow own and wield, then we’ve done nothing but build intellectual totems to hubris.

Instead of trying to resolve the paradoxes, maybe just accept them. Name it to tame it, put it in a drawer, and move on. You don’t need the world to bend around your own brain to protect your ego. You can just have a big list that reminds you that the task is futile. That’s the antidote.


Just some excerpts of obvious relevance:

Why the ‘paradox mindset’ is the key to success (BBC)

  • Over a series of studies, psychologists and organizational scientists have found that people who learn to embrace, rather than reject, opposing demands show greater creativity, flexibility and productivity. The dual constraints actually enhance their performance. The researchers call this a “paradox mindset” – and there never be a better time to start cultivating it.

  • Contemplation of apparent contradictions can break down our assumptions, offering us wholly new ways of looking at the problem…study of how revolutionary thinkers had spent considerable time “actively conceiving multiple opposites or antitheses simultaneously”.

  • “Paradoxical cognition” can also help more average thinkers to solve everyday problems, and organizations to enhance their performance. In one of the early studies, Ella Miron-Spektor, associate professor of organizational behavior at INSEAD, and her research collaborators asked participants to write down three paradoxical statements. This, the participants were told, could be as banal as the idea that “sitting can be more tiring that walking”; they simply had to list any thoughts that were “seemingly contradictory but nonetheless possibly true”. She then gave them two of psychology’s standard tests of creativity. The first was the “remote association test”, which requires participants to find a common word that links three different alternatives. What links “sore, shoulder, sweat”, for example? The answer is cold – and if you get it right, you’ve been able to spot the hidden connections between diverse ideas, which is considered essential for many forms of creative thinking. [Me: Reminds me of Codenames!]

  • Although the participants’ paradoxical statements were not directly related to the task itself, their contemplation of the contradictory ideas seemed to have freed their thinking from its usual constraints, meaning that they were better able to think “outside the box” (or, in this case, inside it).

  • Questionnaire to measure the “paradox mindset”. The participants were first asked to rate statements about their willingness to embrace contradictions, such as:
    • When I consider conflicting perspectives
    • I gain a better understanding of an issue I am comfortable working on tasks that contradict each other
    • I feel uplifted when I realize that two opposites can be true

  • The participants were also asked to describe how often they experienced “resource scarcity” at work (the need to perform highly under limited time or financial resources). Their supervisors, meanwhile, had to rate their performance and innovation within the role. Sure enough, the study found that the employee’s paradox mindset had a large influence on their ability to cope with the demands. For the people who scored highly, the challenge of dealing with limited resources was energizing and inspiring, and their performance actually increased under the tension, so they came up with new and better solutions to the problems within their role. Those without the paradox mindset, in contrast, tended to crumble and struggled to maintain their performance when resources were scarce.
  • The prospect of deliberately embracing competing demands may sound arduous, but Chinese researchers have recently shown that people with this mindset also get greater satisfaction from their role. There is enjoyment, apparently, in reconciling two opposing goals – provided you have the right mindset

  • Simply note down any paradoxes you encounter – and to make a point of contemplating them before you set about solving problems. If you are stuck for ideas, you could look further into the paradoxes that inspired scientists like Einstein and Bohr. Greek philosophy is also full of paradoxical ideas that might get your creative juices flowing. Your own job may already contain many contradictory goals that could inspire paradoxical cognition. In the past, you might have assumed that you need to sacrifice one for the other – but if you want to cultivate the paradox mindset, you might spend a bit more time considering the ways you can pursue them both, simultaneously. Rather than seeing the potential conflicts as something to avoid, you can begin to view the competing demands as an opportunity for growth and a source of motivation. (And if there aren’t any external pressures, you could create your own – asking, for instance, how you could increase the efficiency and accuracy of your performance on a particular task, if only for an exercise in paradoxical thinking.)

Neural correlates of maintaining one’s political beliefs in the face of counterevidence (Nature)

  • People often discount evidence that contradicts their firmly held beliefs. However, little is known about the neural mechanisms that govern this behavior.

  • Data on any topic—from climate science to epidemiology—must first be successfully communicated and believed before it can inform personal behavior or public policy. Viewed in this light, the inability to change another person’s mind through evidence and argument, or to have one’s own mind changed in turn, stands out as a problem of great societal importance. Both human knowledge and human cooperation depend upon such feats of cognitive and emotional flexibility.

  • It is well known that people often resist changing their beliefs when directly challenged, especially when these beliefs are central to their identity. In some cases, exposure to counterevidence may even increase a person’s confidence that his or her cherished beliefs are true. Although neuroscientists have begun to study some of the social aspects of persuasion and motivated reasoning, little research is aimed directly at understanding the neural systems involved in protecting our most strongly held beliefs against counterevidence.

  • One model of belief maintenance holds that when confronted with counterevidence, people experience negative emotions borne of conflict between the perceived importance of their existing beliefs and the uncertainty created by the new information. In an effort to reduce these negative emotions, people may begin to think in ways that minimize the impact of the challenging evidence: discounting its source, forming counterarguments, socially validating their original attitude, or selectively avoiding the new information. The degree to which such rationalization occurs depends upon several factors, but the personal significance of the challenged belief appears to be crucial. Specifically, beliefs that relate to one’s social identity are likely to be more difficult to change.

  • Our results show that when people are confronted with challenges to their deeply held beliefs, they preferentially engage brain structures known to support stimulus-independent, internally directed cognition. Our data also support the role of emotion in belief persistence. Individual differences in persuasion were related to differences in activity within the insular cortex and the amygdala—structures crucial to emotion and feeling. The brain’s systems for emotion, which are purposed toward maintaining homeostatic integrity of the organism, appear also to be engaged when protecting the aspects of our mental lives with which we strongly identify, including our closely held beliefs.

Learning Is Behavioral Change: A Presentation By Alix Pasquet

Frederik Gieschen hosted a presentation by hedge fund manager Alix Pasquet.

The presentation is titled:

Learning for Analysts and Future Portfolio Managers (YouTube)

This presentation is overflowing with ideas and insights. I took notes. They are not intended to be comprehensive, but rather a filter of what stood out to me. If the topics sound interesting definitely check out the video yourself, there’s a lot of detail I’m leaving out.

Alix mentions that the presentation was inspired by Bill Gurley’s talk:

Runnin’ Down a Dream: How to Succeed and Thrive in a Career You Love (YouTube)


About Alix

  • Runs a “behavioral hedge fund” Prime Macaya that seeks to exploit uneconomic group behavior
  • Alix came from the game world specifically poker and backgammon

Key Takeaways From The Presentation

The presentation was focused on learning in the context of rising from an analyst to portfolio manager. Many of the lessons felt more universal which is what interested me. 

  • In the investment business, we are paid to learn
  • Learning is behavioral change. If your behavior hasn’t changed you haven’t learned.
    • Jim O’Shaughnessy quote emphasizes application: “Don’t look for the meaning, look for the uses”
  • Create the conditions to learn as opposed to relying on willpower.
    • There’s an emphasis on community for feedback, collaboration, filtering, and as a forcing function (ie instead of practicing public-speaking alone, join Toastmasters. I found this resonant because being forced to play guitar on stage or gives your practice more intent)

Structure of the Presentation

The first hour is focused on:

  • Problems in learning
  • Mindsets required for learning

The second hour focuses on:

  • Conditions, procedures and actions steps.

    These include specific discussions about:
    • being a good mentee
    • personal knowledge management
    • the idea of a personal lab where you can practice your learning
    • support structures
    • the role of physical exercise
    • inspectional reading
    • studying frauds and deception to “know your enemy”
    • exploiting group behavior

What Caught My Eye

Ideas That Resonated

  • Alix believes “learning is a team sport” which echoes my belief that “trading is a team sport” 

  • Problems as well as smart people and goals are useful filters for narrowing what to learn

  • The investing job needs to be about more than the money because you will compete with passionate, competitive people determined to learn and get better.

    “Many that have brain power should literally be doctors and nuclear physicists but they’re out there chasing stocks. I love what I do but I have no notion that I’m helping out the world here. We’re having fun with what we do and hopefully, we’ll make some money. One day we can help the world but this is not a business where you’re adding value to the world and if you have the intelligence and you don’t love this business go do something else.”

  • Overfitting lessons

    “Analysts don’t understand that they need to tailor their style structure processes and resources according to their own personalities and temperament. They try to replicate what others have done not realizing that these people have totally different personalities and have gone through totally different environments.

    No lesson is better than the wrong lesson. The key suggestion I would make is to involve others. Get feedback from others that will keep you intellectually honest because in the hedge fund business we have a tendency of doing this thing called “revisionist history” which frankly exists to protect our confidence but sadly it doesn’t improve our investment performance.”

    Me: Unwarranted confidence from “resulting” undermines one of the most key inputs to sound betting — calibration. Consider the Paul Slovic horse handicappers study that found  the accuracy of handicapperss’ predictions did not improve from the original 5 variables they desired as they were given more variables. Their confidence went up although their accuracy did not! The handicappers with only 5 variables were well-calibrated. They were close to 2x better than chance at predicting the winner (20% vs 10%) and they estimated their confidence as such. When they were given more variables their accuracy remained 20% but confidence grew to 30%!
  • Investing feedback is long and deceptive unlike games

    • “Futsal principle”

      “Futsal is soccer at the fraction of the size of a football team pitch. The number of players is smaller. You would think that it increases the number of strategic interactions by double but actually, it increases the number of interactions by eight to sometimes 16 times. And what that does is you’re learning at a very, very fast clip.

      And one of the patterns that we’ve seen is great investors often have gone through a futsal period in their careers. So Dan Loeb, for example, in the early 90s, he worked at Jeffries right at the moment when the Resolution Trust Corporation was selling off the problem assets of the savings and loan debacle at discounted prices in a two year period. He saw a deal every few days. And that increased the number of reps that he saw. But also, he had great customers, he had a young David Einhorn and a young David Tepper as customers. And the exposure and the reps were amazing.”
  • Like Alix, I found Mauboussin to be the bridge between trading and investing

    Measure what is incorporated in the “outside view” then work backward:

    • “PIE”: price implied expectation

    • Options implied expectation

    • Narrative/sentiment analysis
  • Imitate, Assimilate, Innovate

    Mediocre investors and business builders try to innovate first, often fail, and fall back on  imitation so they can eat. Originality starts with imitating first.

    Me: resonant just based on what I’ve read about writers. We learn to play covers before we create ourselves.
  • Importance of Mentors

    • “If you’re early on in your career and they give you a choice between a great mentor or higher pay, take the mentor every time. It’s not even close. And don’t even think about leaving that mentor until your learning curve peaks. There’s just nothing to me so invaluable in my business, but in many businesses, as great mentors. And a lot of kids are just too short-sighted in terms of going for the short-term money instead of preparing themselves for the longer term.”—Stanley Druckenmiller

      Me: reminds me of the greatest advice I received coming out of college: No matter who you work for you will be rich. The question is who do you want to work with? She knew that I knew that I would learn more at Susq and when you are 22 years old that’s what you optimize for. That’s the best way to invest in yourself. That’s when your human capital dwarfs the value of your financial capital. We are all living longer. Even at 30 I’d give the same advice. It’s a long road.
  • Community as leverage

    • Community (peers and mentors) can often have access to the context you need for an idea that might otherwise be a dead end
    • Ability to crowdsource if you have an audience (usually content is a key to having an audience in the first place so content is also a form of leverage)
    • Importance of network diversity. Belong to multiple networks which can be sorted by geography, interests, age etc

Notable Ideas

  • “Analysts do not understand that there’s a difference between analytical thinking and portfolio management thinking”

    • Bill Miller: “The difference between analytical thinking and pm thinking is you give an analyst a problem and they deconstruct it and figure out what makes a problem tick but you give a problem to a pm and his first question is how do i make money from this?”

      Me: portfolio construction and betting literature is required for analysts to be PMs.

  • Behavioral bias research is more focused on individuals, but markets are more concerned with group behavior. So there’s a “fallacy of composition. If you take 10 people that are prone to cognitive biases, their group behavior may actually be quite rational.”

    Me: a key focus should be on the wisdom and madness of crowds.

  • Learning from your own successes but others’ failures

    Surgeons learn more from their own successes than from their own failures but they learn more from the failures of others than they do from the successes of others. This was over 6500 procedures. Also my neighbor is a doctor and I spoke to him about this study and he actually made a very important comment that surgeons that had made a fatal mistake over the operating table were more likely to leave surgery because their confidence was shaken whereas a successful surgeon that had seen a surgeon have make a fatal mistake can learn better from that. It’s important to retain this as a mindset of learning from your own successes and the failures of others. Don’t get me wrong you can still learn from the successes of others but temper it. Filter it correctly. You don’t want to overindex to the successes you see in others especially since you don’t have all the context, but it might be easier to learn from somebody else’s mistake. Especially since your own mistakes get you very emotionally involved.

  • They study market participants at 4 levels to see if they are “creating opportunities they can exploit”:

    1. what are their skills?
    2. psychology?
    3. positioning?
    4. institutional quirks?
  • Data hierarchy: data —> information —> understanding —wisdom.

    • Your goals are a filter for how you travel from data to information.
    • Procedures are how you move from information to understanding.
    • The meta experience of “testing it again with your network, teaching it to somebody else, and the ability to create things gets you to wisdom”
  • Derek Sivers: “The standard pace is for chumps”

There’s no reason why it needs to take 10,000 hours. You can do it in much much less period of time if you can test it and get immediate feedback in a low-cost way than it is to be thinking about it for a long time and cramming your brain with more information.


  • “Brute intelligence can be a handicap if it leads you to believe you have figured it all out…need to have soft intangibles like integrity, grit, adaptability, flexibility, humility”.

    Me: While traders are screened for these intangibles, especially teachability/intellectual humility, another way to think of this is the importance of teams. There is a role for one-dimensional Russian super geniuses in these organizations — well captured by this quote: “The analyst’s job is to be creative everything else I can outsource to India”

  • “There’s actually no good book on portfolio management which is incredible to me. Not only that, somebody mentioned on a podcast that there’s no analytical team that analyzes what are the best portfolio management techniques”

    Me: pod/prop/and some quant shops no?

  • Alix belief that strong investors should be strong writers and that there’s a connection between these skills.

    Me: I don’t think this is true for traders. So then I wonder if Alix is overstating the case (even after allowing for exceptions) OR is trading and investing sufficiently different that my experience is not relevant. 

    Trading Vs Investing

Notable Book Recs

The entire presentation is actually organized around a reading list by topic so there are so many thoughtful book recs. That alone is worth watching for. The rationale for 2 particular book recs stood out to me:

  • The Age of The Unthinkable

    • This book “doubled the effectiveness of my judgement” and demonstrates how the world is changing rapidly and the importance of learning.

    • He gives the example: “Market structure has changed. Markets are totally different post-2008. The pipes of liquidity have changed. Prior to ‘08 we had market makers, we had prop desks. They were more prevalent. Index funds were smaller, hedge funds were smaller. Now we have no prop desks, quant funds are massive, index funds are massive, hedge funds are massive… As market participants, we’re inclined to study the past, but past markets may not be appropriate to study here because we’ve never seen a bear market with our current market structure.”

Me: this is resonant and reminds me of:

  • The Path of Least Resistance

    • Demonstrates how “structure drives behavior” and the importance of settings and environment.. consider this simple story:

      • Take two people. A very intelligent person and a total moron. You drop both in the Russian tundra in the middle of winter. The intelligent person gets a shack that can’t really handle the environment well and doesn’t have that much food. You put the moron in a shack that can handle the environment well and has enough food. Unless the intelligent person goes over there and forcibly takes it from the moron, he’s gonna die.

      • It’s about creating structures that you can fall back upon, that make you more resilient [as opposed to] being internally resilient or having inner grit. There are people that we think have this level of motivation level of grit and level of determination that’s incredible, but what we don’t see are the support structures that they’ve created in the background or exploited or frankly they were lucky.

      • An example of resilience would be to have ample living costs saved so you can think clearly as you take risk or not upgrading your lifestyle in line with your success so you can continue to take chances. In studying failure, one of the invisible patterns, or as Alix calls it “the silent killer” is investment managers raising their personal overhead:
        • It’s a “monkey on their shoulder that they have to view every single thing through and it impacts their judgment and risk-taking ability. We call it the ‘silent killer’ because we’ve seen it kill a bunch of hedge funds but the manager never talks about it as the reason they couldn’t take risks anymore.”

Another Kind Of Mean

Let’s use this section to learn a math concept.

We begin with a question:

You drive to the store and back. The store is 50 miles away. You drive 50 mph to the store and 100 mph coming back. What’s your average speed in MPH for the trip?

[Space to think about the problem]




[If you think the answer is 75 there are 2 problems worth pointing out. One of them is you have the wrong answer.]




[The other is that 75 is the obvious gut response, but since I’m asking this question, you should know that’s not the answer. If it’s not the answer that should clue you in to think harder about the question.]




[You’re trying harder, right?]




[Ok, let’s get on with this]

The answer is 66.67 MPH

If you drive 50 MPH to a store 50 miles away, then it took 60 minutes to go one way.

If you drive 100 MPH on the way back you will return home in half the time or 30 minutes.

You drove 100 miles in 1.5 hours or 66.67 MPH

Congratulations, you are on the way to learning about another type of average or mean.

You likely already know about 2 of the other so-called Pythagorean means.

  • Arithmetic mean

    Simple average. Used when trying to find a measure of central tendency in a set of values that are added together.

  • Geometric mean

    The geometric mean or geometric average is a measure of central tendency for a set of values that are multiplied together. One of the most common examples is compounding. Returns and growth rates are just fractions multiplied together. So if you have 10% growth then 25% growth you compute:

    1 x 1.10 x 1.25 = 1.375

    If you computed the arithmetic mean of the growth rates you’d get 17.5% (the average of 10% and 25%).

    The geometric mean however answers the question “what is the average growth rate I would need to multiply each period by to arrive at the final return of 1.375?”

    In this case, there are 2 periods.

    To solve we do the inverse of the multiplication by taking the root of the number of periods or 1.375^1/2 – 1 = 17.26%

    We can check that 17.26% is in fact the CAGR or compound average growth rate:

    1 x 1.1726 * 1.1726 = 1.375

    Have a cigar.

The question about speed at the beginning of the post actually calls for using a 3rd type of mean:

The harmonic mean

The harmonic mean is computed by taking the average of the reciprocals of the values, then taking the reciprocal of that number to return to the original units.

That’s wordy. Better to demonstrate the 2 steps:

  1. “Take the average of the reciprocals”

    Instead of averaging MPH, let’s average hours per mile then convert back to MPH at the end:

    50 MPH = “it takes 1/50 of an hour to go a mile” = 1/50 HPM
    100 MPH = “it takes 1/100 of an hour to go a mile” = 1/100 HPM

    The average of 1/50 HPM and 1/100 HPM = 1.5/100 HPM

  2. “Take the reciprocal of that number to return to the original units”

    Flip 1.5/100 HPM to 100/1.5 MPH. Voila, 66.67 MPH

Ok, right now you are thinking “Wtf, why is there a mean that deals with reciprocals in the first place?”

If you think about it, all means are computed with numbers that are fractions. You just assume the denominator of the numbers you are averaging is 1. That is fine when each number’s contribution to the final weight is equal, but that’s not the case with an MPH problem. You are spending 2x as much time as the lower speed as the higher speed! This pulls the average speed over the whole trip towards the lower speed. So you get a true average speed of 66.67, not the 75 that your gut gave you.

I want to pause here because you are probably a bit annoyed about this discovery. Don’t be. You have already won half the battle by realizing there is this other type of mean with the weird name “harmonic”.

The other half of the battle is knowing when to apply it. This is trickier. It relies on whether you care about the numerator or denominator of any number. And since every number has a numerator or denominator it feels like you might always want to ask if you should be using the harmonic mean.

I’ll give you a hint that will cover most practical cases. If you are presented with a whole number that is a multiple, but the thing you actually care about is a yield or rate then you should use the harmonic mean. That means you convert to the yield or rate first, find the arithmetic average which is muscle memory for you already, and then convert back to the original units.


  • When you compute the average speed for an entire trip you actually want to average hours per mile (a rate) rather than the rate expressed as a multiple (mph) before converting back to mph. Again, this is because your periods of time at each speed are not equal.
  • You can’t average P/E ratios when trying to get the average P/E for an entire portfolio. Why? Because the contribution of high P/E stocks to the average of the entire portfolio P/E is lower than for lower P/E stocks. If you average P/Es, you will systematically overestimate the portfolio’s total P/E! You need to do the math in earnings yield space (ie E/P). @econompic wrote a great post about this and it’s why I went down the harmonic mean rabbit hole in the first place:

    The Case for the Harmonic Mean P/E Calculation (3 min read)

  • Consider this example of when MPG is misleading and you actually want to think of GPM. From Percents Are Tricky:

    Which saves more fuel?

    1. Swapping a 25 mpg car for one that gets 60 mpg
    2. Swapping a 10 mpg car for one that gets 20 mpg

    [Jeopardy music…]

    You know it’s a trap, so the answer must be #2. Here’s why:

    If you travel 1,000 miles:

    1. A 25mpg car uses 40 gallons. The 60 mpg vehicle uses 16.7 gallons.
    2. A 10 mpg car uses 100 gallons. The 20 mpg vehicle uses 50 gallons

    Even though you improved the MPG efficiency of car #1 by more than 100%, we save much more fuel by replacing less efficient cars. Go for the low-hanging fruit. The illusion suggests we should switch ratings from MPG to GPM or to avoid decimals Gallons Per 1,000 Miles.

  • The Tom Brady “deflategate” controversy also created statistical illusions based on what rate they used. You want to spot anomalies by looking at fumbles per play not plays per fumble.

    Why Those Statistics About The Patriots’ Fumbles Are Mostly Junk (14 min read)

The most important takeaway is that whenever you are trying to average a rate, yield, or multiple consider

a) taking the average of the numbers you are presented with


b) doing the same computation with their reciprocals then flipping it back to the original units. That’s all it takes to compute both the arithmetic mean and the harmonic mean.

If you draw the same conclusions about the variable you care about, you’re in the clear.

Just knowing about harmonic means will put you on guard against making poor inferences from data.

For a more comprehensive but still accessible discussion of harmonic means see:

On Average, You’re Using the Wrong Average: Geometric & Harmonic Means in Data Analysis: When the Mean Doesn’t Mean What You Think it Means (20 min read)
by @dnlmc

This post is so good, that I’m not sure if I should have just linked to it and not bothered writing my own. You tell me if I was additive.

Kid’s Excel Lesson: Random Numbers

As you guys know I like to share stuff I’m doing with the kids in case you find it useful for your own teaching desires. Lately, I’ve been trying to help Zak (turned 9 last month) learn a bit of Excel. Excel is inherently useful but it’s also a bit of a coding language so it’s a soft onramp to thinking logically and computationally. We did several small Excel projects together this summer. I will IV-drip them to you over time but for today I’ll share one we did just this week.

Zak likes math in general and I often ask him to work on his workbooks (we just got both Zak and his 6-year-old bro Kanagaroo Math books. They require more creativity than Kumon-type stuff and also you can enter their international math competition in March.) Anyway, I asked Zak to “go do some workbook” and he asked if instead, I could give him a bunch of multiplication problems involving 3-digits.

Teaching moment.

Zak, how about we use Excel to generate the questions? He doesn’t know how to do that so we:

  1. Break the problem into small steps.
  2. Use the Socratic method.

If you want to replicate this with your kids, here’s a loose script.

Step 1: We need to generate 3 random numbers.

This didn’t go quite as planned. Zak went to Google and discovered on his own that he could use Excel’s RANDBETWEEN() function to generate a number between 100 and 999. I gave him a ton of praise for being resourceful. This is basic adulting really. But also, I wanted this to be more involved so I said let’s try to do it another way.

Here’s what I asked him:

What digits can exist in each of the ones, tens, and hundreds place?

The very act of asking him put him on alert. He recognized that while the ones and tens place can be 0 thru 9, the hundreds place could only be 1 thru 9. Nice work Zak.

Excel’s RAND() function generates a number between 0 and 1.

How do we make a number between 0 and 9 if we start with an Excel random number?

He realized that we need to multiply the number by 10 but I had to prompt him for a bit.

How do we get rid of the decimal?

Zak: we can round

How’s that going to work?

Zak: we want to round down (after he considered what would happen in both the round up and round down cases. You don’t want 9.4 or 9.8 to ever round up because 10 is not a valid output for our purpose).

Great. Now we get a PEDMAS lesson. Excel solves parenthesis first. With some handholding we arrive at the function for the ones and tens place:

=ROUNDDOWN(10 * RAND(), 0)

The zero was also a good lesson. Excel is not a mindreader, you need to tell it how many decimal places to go to.

But what about the hundreds place? How are you going to convert a random number between 0 and 1 into 1 thru 9?

Zak: [crickets]

Ok, what if you needed to take a random number and convert it to a 1 or 2?

Zak suggests doing what amounts to an IF-Then-Else statement.

Good. What’s another way to do that using multiply or divide?

He got stuck here and I had to play the scenario game with him.

What if we multiply by something other than 10?

And…he lost stamina. That’s ok. We can come back to it. I ultimately explained it, but I’ll ask him to reproduce it soon enough. He still won’t know how and we’ll have to go through all of this again. That’s also expected and ok. Every time we work through it, I suspect the web of thinking fibers thickens a bit, his stamina inches ahead, and most importantly he gets used to the idea that work without a satisfying end is ok. Enjoy the smaller milestone victories along the way. He’s still much further than he was when he woke up because he got to stretch a bit and exercise that little bicycle up there in a systematic way.

Just to be complete about this post, the answer is that instead of multiplying by 10, you multiply by 9 (you are trying to take a continuous range of numbers and bin it into 9 discrete numbers), but remember you must also round up this time, because we want the range to be 1 through 9 not 0 through 8.

Final answer:

=ROUNDUP(9 * RAND(), 0)

From there, just

a) concatenate the 3 digits


b) multiply each digit by its respective place (so the first number by 1, the second number by 10, and the one we generated with ROUNDUP by 100) and sum them all together.

We did both methods just to be complete.

And voila, now he can generate his own worksheet of 3-digit multiplication that’s different every time.

I will be sharing some more kid stuff in the future. A select few from the archive:

  • A Socratic Money Lesson For 2nd Graders (3 min read)
  • Hands-On Resources to Teach Kids About Business (2 min read)
  • Bohnanza Is A Great Trading & Business Game (3 min read)
  • Thoughts About Monopoly As A Teaching Tool (2 min read)