I’m going to brag.
We pulled it off. That dream where your siblings or friends live in the same cul-de-sac and the kids just go back and forth to their cousins’ house. Built-in babysitting for impromptu date nights or even a night away.
My wife’s sister and her family moved into the house behind us 2 months ago. We cut a gap in the fence between the properties and my brother-in-law strung lights across the path (we get coyotes so the kids get extra-nervous traversing at night…we keep a box of small animal bones we find in the yard which reminds me I need to order one of these).
We are 2 families of 4 plus grandma who lives in an ADU at our house. The kids are 6, 9, 11, 13. The 3 younger ones walk to school together every day. The oldest is the only girl and despite her interests maturing quickly, the kids are thick as thieves. Any pair of them gets along great.
The arrangement comes with some costs. We all rent so there’s always the sword of displacement hanging over our heads. And renting in general doesn’t sit well with everyone (although I love it and it would take something really special to make me want to own again— I have zero interest in spending mindshare on my house). But the trade-off is worth it.
Just this week, we had 2 large family dinners next door plus a big Super Bowl party. The kids’ friends were around a lot, staying over for dinner, playing basketball in the driveways. There were 2 cousin sleepovers and on one night when Yinh had to catch up on work late into the evening, I just stayed up chatting with my in-laws until midnight (thanks for that you guys— we had some tragic news in our community this week, and it was helpful to have people to talk to IRL).
My brother-in-law has a home gym in a shipping container that’s on the property. I can pop over for a workout midday. He and our other friend/neighbor train together 3 mornings a week. And the meal plan situation should make you hate me. Grandma and my bro love to cook and will prepare dinner for everyone.
It has felt like a lucky plot twist. We sold our house over 2 years ago and explored moving to a lower-cost-of-living state. But like a couple that takes a break and realizes that the grass is not greener, we came back with a renewed commitment to where we live. Everywhere has warts. The only one that bothers us here is the cost of living. So we sat down and thought about our priorities hard. “Emotionally” moving (I mean we were serious — we bought a house in Texas and scratched the trade a year later after changing our minds) and coming back is an expensive but effective way to examine your priorities. But the price of information about ourselves has been an absolute bargain.
Leaning into our lives here and not wondering about “what could be” elsewhere, is incredibly liberating. It gave our in-laws the confidence to take the giant step of moving from the city to live near us. As adults neither my brother nor sister here has lived anywhere except SF — they still can’t believe it gets to the 30s at night out in the ‘burbs. It made investing time and money in our social club a no-brainer (I’ll eventually do an update about that — we are nearly 70 members now…the roster of events promoting togetherness and personal growth is taking shape and it’s a project I’m excited about and proud to be a part of. It also takes a village and I could see potentially writing a guide or blueprint for how to make this happen in other communities, but for now, we are still very much learning as it comes along).
I’m gonna do that thing where I take the concentrated dose of blue meth satisfaction and cut it so everyone can get a taste. I’ll generalize the lesson. Because that demonstrates the point: Community underpins all of this. It’s social bonds. It’s a reminder that the original social media was not just a performance for onlookers disguised as a conversation. It was touch. It was sharing. It was cooking for each other and helping each other’s kids out. But mostly, when you get to the heart of it – it’s being seriously invested in one another. If my in-laws are not well, I’m not well. Lives are meant to be interlocked. It’s a vulnerability for sure.
But is winning by yourself actually winning?
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There are a couple of ideas that tug on me with a force I haven’t felt before my experience in the last 2 years.
Regarding my career
It’s become more of a priority to sustain a living in a way that feels deeply tied to others. There are a lot of ways to make money, but finding a way that doesn’t feel alienating, finding a way that feels like I’m lifting others is harder to pull off. To be clear, any constraint limits your options. Expectancy-wise I’m paying for this preference the same way a remote worker might be taking a pay cut compared to the counterfactual. But this is only a concern if I measure expectancy only in dollars. That’s falling into a trap of letting legible accounting dictate all of what matters. You know what’s more baller — giving your soul a bank account and finding a way to stack it. That means more energy for everyone else around you.
Look, if you have the luxury of reading a Substack at your desk, then simply making money is easy. You just have to be good at something. By definition, mediocrity is everywhere. It’s a low bar for ambition. Making enough money on your terms takes either top 1% talent or being good at something plus courage. If you stop at just being above average at something, some overlord will always stand ready to make you part of their portfolio. But you’ll just be another asset to be rebalanced on their schedule.
You don’t become irreplaceable until you display how you are different (I’m obviously talking about the differences that are helpful while remaining aware that many strengths are weaknesses in other contexts). You cannot do this from a place of fear. You can’t maximize opportunities if you can’t afford to say no. So it stands to reason that you don’t want to build your life in a way that makes you unable to say no. That’s the real trap of conformity. Conformity isn’t clothing. It’s not even what you say necessarily. It’s relegating your agency for comfort to someone with a different mix of values because you were too lazy to identify your own. And the irony is they probably did the same.
[It’s out of scope for this post, but this idea is deeply intertwined with learning which I believe is really about agency and freedom from conformity. And I don’t mean that in some truther way which is just conformity sold as alternative. Like what “grunge” became. And I say this as someone with all the albums.]
Spending Money Strategically
I mentioned that emotionally moving was expensive. It’s expensive to transact real estate and travel. But the costs were worth the information. That’s a concept that exists in poker or even trading. For example, you can “fish” mid-market by dangling a one-lot to see where the bots live (and to defend yourself against such tactics, in a dark pool for example, you can define a minimum trade size).
In The Art and Science Of Spending Money, Morgan Housel offers a menu of ways to spend money that you may not have considered. #10 explains why:
Not knowing what kind of spending will make you happy because you haven’t tried enough new and strange forms of spending.
Evolution is the most powerful force in the world, capable of transforming single-cell organisms into modern humans.
But evolution has no idea what it’s doing. There’s no guide, no manual, no rulebook. It’s not even necessarily good at selecting traits that work.
Its power is that it “tries” trillions upon trillions of different mutations and is ruthless about killing off the ones that don’t work. What’s left – the winners – stick around.
There’s a theory in evolutionary biology called Fisher’s Fundamental Theorem of Natural Selection. It’s the idea that variance equals strength, because the more diverse a population is the more chances it has to come up with new traits that can be selected for. No one can know what traits will be useful; that’s not how evolution works. But if you create a lot of traits, the useful one – whatever it is – will be in there somewhere.
There’s an important analogy here about spending money.
A lot of people have no idea what kind of spending will make them happy. What should you buy? Where should you travel? How much should you save? There is no single answer to these questions because everyone’s different. People default to what society tells them – whatever is most expensive will bring the most joy.
But that’s not how it works. You have to try spending money on tons of different oddball things before you find what works for you. For some people it’s travel; others can’t stand being away from home. For others it’s nice restaurants; others don’t get the hype and prefer cheap pizza. I know people who think spending money on first-class plane tickets is a borderline scam. Others would not dare sit behind row four. To each their own.
The more different kinds of spending you test out, the closer you’ll likely get to a system that works for you. The trials don’t have to be big: a $10 new food here, a $75 treat there, slightly nice shoes, etc.
Here’s Ramit Sethi again: “Frugality, quite simply, is about choosing the things you love enough to spend extravagantly on—and then cutting costs mercilessly on the things you don’t love.”
There is no guide on what will make you happy – you have to try a million different things and figure out what fits your personality.
Recently, I’ve seen a wild example of this.
My wife has a close friend that was in the rat race grind. After joining Yinh on the board of OrFA, the friend has been regularly visiting the orphanage in Vietnam. She’s a tall blond, as American as apple pie. A stranger in a strange land in the Vietnamese countryside. But she found herself deeply moved by not only the children but the local culture and all its people. She has dramatically re-arranged her entire life to prioritize her involvement and presence in Vietnam. Witnessing the impact on an otherwise familiar, professional life that started with a donation and some curiosity has been a powerful frame shake. (My family, 13 of us in total, are going to Vietnam for a few weeks this year and have already planned a soccer match between all the kids at the orphanage. If my kids moan about what’s for dinner after that trip, they’re getting lit the f up).
This is a reminder. You can just do things. You can’t introspect your way to knowing what you want. It’s too much projection of your current self into a different reality. It doesn’t recognize that the feedback changes you.
Spending money in a new way is just another method to try on different versions of yourself. To explore personal frontiers on the not-so-crazy lark that there are deeply rewarding modes to explore the world that you are completely ignoring. Your fixation on the crowded paths your surroundings have directed you towards might frustrating, not because of any personal failings, but because those paths are overbid (look no further than the college admission Hunger Games).
If you can’t be happy unless you get that house or that wedding or that title, it’s not because they are your destiny — it’s because you haven’t taken your imagination off-leash.
Money Angle For Masochists
Using Log Returns And Volatility To Normalize Strike Distances (8 min read)
We start with a review:
Consider a $100 stock. In a simple return world, $150 and $50 are each 50% away. They are equidistant. But in compounded return world they are not. $150 is closer. This blog post will progress from an understanding of natural logs to normalizing the distance of asset strikes.
We extend the review to a math lesson. If you have ever struggled with natural logarithms and e, this is your lucky day.
You probably remember hearing about the constant e and the natural log from math class. You also repressed it. Because it was taught poorly.
You might already know how to annualize compounded returns. You will learn how to annualize log returns by understanding how to decompose e into 2 components: rate and time.
Thus far we have learned to standardize distance or growth rates using continuous compounding. An unfancy reason why this is useful is you don’t need to footnote every compounding example with an interval. A total return and compounded return vary with the interval. Log returns dispense with the need to quibble about intervals.
At this point, we have normalized returns for continuous compounding.
Now we can go to the next step and standardize returns based on an asset’s volatility. This is how we find the moneyness of strikes. This is the beginning of proper comparisons and benchmarking. This is the essence of measurement, which is what I emphasize is most of the job-to-be-done in trading. It’s kind of like how data science is mostly cleaning data. The analysis is often the easy part.
By the end of the post, you will have done nothing but a little logic and simple algebra to understand this picture:
The post concludes:
What’s the point of all this?
For anyone within sneezing distance of a derivatives desk, these are rudiments. These computations are the meaning behind the Black Scholes’s z-scores (d1 and d2) and probabilities. These standardizations are critical for comparing vol surfaces. If you can’t contextualize how far a price is you cannot make meaningful comparisons between option volatilities and therefore prices.
If you only trade linear instruments because you are a well-adjusted human then hopefully you still found this lesson helpful. Seeing math from different angles is like filling in the grout in the tiles of your mental processing. You can measure the distance (or accumulated growth, positive or negative) in log space to account for compounding. You can standardize comparisons by using the asset’s vol as a measuring stick. And after all that, if you still don’t enjoy this, you can feel better about your life choices to do work that doesn’t rely on it.
If you do rely on understanding this stuff, hopefully you got e.00995-1 better today.