Insider Newsletter: Issue #314

What if luck is a strategy? From bombers and bitcoin to boring plastics and platinum mines—discover the asymmetry hiding in plain sight. Which one is yours?

🤫 For subscribers who have been asking, our Asymmetric Investing Service can be found here

Greetings, friends!

Before we get started, we recorded a 32 minute video for you with an overview of some of the topics covered in this Newsletter issue. It’s below the paywall…To watch, scroll down a few sections…

Onwards…

The above is from Michael at our recently completed Cayman Islands event.

And here’s the Black Rock Desert from Mark:

Munger Magic

Over the weekend I was trawling through Youtube, looking for insights/thoughts on the fading empires’ bombing of Iranian nuclear installations (or whatever it was that they actually bombed).

I came across this and couldn’t help but notice the following clip on Charlie Munger’s words of wisdom.

Here’s the transcript of the last few minutes of the interview:

It’s amazing how if you just get up every morning and keep plugging and have some discipline and keep learning, it’s amazing how it works out okay

I don’t think it’s wise to have an ambition to be president of the United States or a billionaire or something like that because the odds are too much against you much better to aim low

I did not intend to get rich, I wanted to get independent, I just overshot.

By the way while you’re clapping some of the overshooting was accidental

You can be very deserving, very intelligent and very disciplined but there’s also a factor of luck that comes into this thing and the people that get the good outcomes that seem extraordinary

The people who have discipline and intelligence and good virtue plus a hell of a lot of luck

Why wouldn’t the world work like that so you shouldn’t give credit for the unusual

A friend of mine said about a colleague of his and his fraternity – he says old george was a duck sitting on a pond and they raised the level of a pond

There are a lot of people that just lock into the right place and rise and then and there are a lot of very eminent people who have many advantages and they’ve got one little flaw or one bit of bad luck and they they’re mired in misery all their lives but that makes it interesting to have all this variation.

Very interesting that Charlie acknowledges the concept of luck and getting lucky!

This circles back to a conversation I had with a friend some 20 years ago (an old investor who started investing in 1970), where he said:

All you have to do to win at this game is to be at the table when your turn to get lucky comes around. Just make sure it doesn’t cost you too much money to sit at the table.

Those words are central to our investing strategy, namely positioning ourselves to get lucky. This is closely tied into the notion of asymmetry of returns.

From a practical perspective, always look at a potential investment and ask yourself “how lucky could I get with this trade?”

But what if positioning yourself to get lucky isn’t about chasing every shiny object—it’s about building the kind of discipline that lets you stay in the game long enough to recognize luck when it knocks?

The real question becomes: how do you structure your portfolio to capture that asymmetry… when it finally arrives?

Speaking of which…

Asymmetry In Motion

You may be aware of Ukraine’s drone attack on Russian bombers a month or so ago, supposedly wiping out 30% of Russia’s heavy bomber fleet.

Now, I know that the media are mostly neanderthals parroting nonsense, but I looked into it, and as far as I can tell (whether the above happened or not), the effectiveness of these tiny little flying death weapons are pretty accurate.

Essentially, it was these little devils, which don’t look that different than what you can buy in an electronics store or from DJI:

As mentioned, we are always apprehensive of believing what we have been led to believe, especially with all the propaganda surrounding the Ukraine war (or any war for that matter).

But let’s not get caught up in the weeds. The key thing I’d like to point out here is asymmetry — how something seemingly small and insignificant (costing a few thousand dollars) can have an extreme impact or result (like taking out a multimillion dollar bomber).

With the dramatic advances in AI we are likely to see a proliferation of asymmetric weapons over the coming years.

Anyway, we don’t want to get bogged down in discussing weapons of war, rather the main point here is asymmetry.

In other words, non-linear outcomes… or in layman’s language, little things having big outcomes.

It is hard to go wrong when you have asymmetry on your side. Because sooner or later you lock onto a big winner.

Consider that anyone investing into this weird thing that geeks were playing with called Bitcoin a few years ago will now appreciate asymmetry:

5 years ago: If you invested $1,000 in Bitcoin in 2020, your investment would be worth $10,444.
10 years ago: If you invested $1,000 in Bitcoin in 2015, your investment would be worth $421,283.
15 years ago: If you invested $1,000 in Bitcoin in 2010, your investment would be worth about $968 million.

We keep highlighting “asymmetric setups” in the Big Five in each publication (see below). Do with them what you will!

Remember YPF when we first highlighted Argentina in late 2021?

Genius! Or maybe it is just that we got real lucky? Note we haven’t closed the trade out yet!

Which brings up the question…When to cash out?