A Dad with Goals

I recently stumbled upon a new video from Veritasium on YouTube about the 80/20 rule. My last post was a bit of a rant, however, this video only got me thinking about the 80/20 rule once again. This time, I started thinking about finance, or rather, trading stocks.

A while back, I and a friend of mine got deep into the world of investing. We learned about tons of various strategies from purely technical through purely fundamental. Ultimately, the only investor I came to believe knows anything is Warren Buffett (shocker). He’s a freak and a dedicated student of the game. Along the way we took a detour through probability based strategies: options volatility strategies and others that rely on monte carlo simulations that play on raw probability. After coding up dozens of ideas we simply realized we weren’t that smart, so these ideas probably wouldn’t play out. So I started thinking: is there a strategy that allows us to invest in a group of stocks and continually invest in winners, while leaving (or dumping) the losers?

The idea is as follows: pick N stocks (say, 100) of your choosing. Ideally, filter out the pure shit stocks (scams, financially dubious, etc) and invest some even amount into each individual stock – say, $1,000 (or less if you don’t have $100k to drop like most folks). Every year, and only once a year, “rebalance” towards the “winners”. Every so often, add a new group of stocks (maybe recent IPOs, or some other criteria) to the bucket. Continue this forever.

There are some critical issues to work through, here:

1. How do you identify which stocks to invest in at the start?
2. How many do you invest in?
3. How much to you invest?
4. What is your rebalancing timeline?
5. What is a “winner”?
6. What is a “loser”? When should you sell, or ignore, an underporforming stock?
7. What happens if a previous loser becomes a winner?
8. What happens if a previous winner becomes a loser?
9. What happens if a winner becomes a loser then a winner, then a loser… etc?
10. When do you add new stocks to the pool?

Answering these questions, and others, is critical to success. You want to maximize your chances on hitting a 1000x stock, while minimizing losses. This strategy is somewhat akin to venture capital, where a small percentage of investments account for most (70% or more) of all profits. Could you replicate such strategy on the stock market? How might you backtest such a strategy without hindsight biases? There is a lot to consider.

Last night we took our daughter to urgent care. She has another ear infection! After the ear tubes have been inserted, no less. It breaks my heart when she’s sick. She is a tough cookie – you don’t really know how sick she might be. Suddenly, pus dripping from her ears. She was in good spirits once we got home, though, and promptly fell asleep.

Today, my brain wasn’t really functioning. I went to sleep late, and woke early (on account of my daughter). Maybe… 5 hours of sleep? I don’t function well with even a bit of deprivation. I’ll share the recurring thought I had, though: the 80/20 rule. Formally, the Pareto principal.

In basically any highly complex situation you’re unlikely to have all of the information, or be able to solve all of the problems. Focus on the most impactful subset of problems. If you can do 20% of the work that accounts for 80% of the impact – do that. And, don’t really think to hard about doing that. You can do the remaining 80% of the work later if you desire.

I don’t know what I want to do when I grow up. If only I could rely on my age as an excuse for indecision; alas, I am an adult… with a kid. As mentioned in my previous post, sometimes I think about risk, which causes me to think about how to mitigate risk, which then causes me to think about how a business should mitigate risk, which finally makes me think I’m prepared to take a risk on an idea – or rather a future.

Many times throughout the work day (yes, every day) I ponder why this all matters (work, not life)? Why do the people I work with treat every little issue as a world-ending crisis? Does it matter if the company sells 35% YoY more shit this holiday season? No, it sure does not, unless you subscribe to the idea that businesses must always grow, indefinitely. As I think harder about why my coworkers (seemingly, I can’t actually tell) care so much about the company that employs them, I start to think about what a company should look like so employees actually care. Then, I start to wonder if I could start that company? Could I help change corporate America? Can I evolve beyond “cog in the machine” into an actual catalyst for good?

Eventually, I bottom out on purpose. What is my purpose? What motivates me? My child, El, motivates me but not in a professional sense. I believe I can still maintain my professional life, professional goals, that do not necessarily need to overlap with my familial goals. Unfortunately, nothing tends to happen over night. Anything worth accomplishing is built on a series of small wins. These wins take time. Time, I don’t have (at least not much). At minimum 8 hours of my day – not including commute time – is spent on my day job. It pays well, but at some point that does have to change. That’s a massive block of time for a job that is purely a transaction in my eyes. I suppose I just have to make small progress towards a future where I can repurpose that time to spend elsewhere – be it family, business, or a hobby. At the very least, I’d like to choose when I dedicate time and to what.

I’m going to do two posts today because, fuck it, I’m having fun.

A few years back my buddy recommended I read Fooled by Randomness by Nassim Taleb. This book is astounding. It fundamentally changed my world view and how I perceive decision making. Read it.

I often think about risk in everyday situations. Rather, I think about risk mitigation. Mostly, as it applies to what I do at work. I build software. I’m tasked with leading some of the largest, most complex, projects that span dozens of engineers (the org I lead has ~50 engineers or so at the time of writing, I believe). These projects span multiple years. In my experience there isn’t a way to accurately predict what will happen throughout the project. Would you predict what your life will look like in 6 months, 1 year, 2 years? Outside of the “standard” things (I go to work, I drive a car, etc) no, you wouldn’t. You’d be wrong, anyway. So, why do we do this for software projects? Why am I expected to estimate these mega-projects like I can predict anything?

The reason we are asked to estimate project timelines is partially to de-risk the project. For one, we can assess the engineering cost and if said cost is too great, we can axe the initiative. Additionally, estimation forces us to think through the details with a bit more care. Hopefully, one might think, we can discover the nuances of the particular project, ask the right questions, get clarity on what we don’t understand, and then come to a conclusion on how long it will take. This is stupid and a waste of time.

Software is constantly changing. New technology is created on the daily. Where I work, system upgrades (usually for legal compliance reasons) are injected into almost every software team’s daily work kneecapping team capacity. By the time you get 6 months into a project the system you are working on could look entirely different from when you started. You can’t predict how this system will change, and therefore you can’t predict how the nature of your work will change over time.

I just don’t get it. All of the “smart people” I work with either miss this entirely, don’t care to challenge the status quo, or they are dumb enough to think they can estimate large projects. I’m ranting. The only solution I can think of is to limit your software to a true “minimal viable product” that fits within a small time window – maybe a month. A month is somewhat predictable. What I’m saying is not novel, however, within my organization it might as well be.

I like thinking about risk. Although, it can lead me down some paths that end up in existential crisis. Maybe I’ll write about that, next.

I’ve started reading Cultures of Growth by Mary C. Murphy. I’ve always aspired to be someone with a “growth mindset”. I was turned on to this book by Adam Grant’s podcast, Rethinking. Mary spoke a bit about her book in general but what hooked me was the idea that we can oscillate between the “fixed” and “growth” mindsets. Mary stated that we get to a particular mindset when we experience a “trigger”. For example, when somebody attacks your character – even if a valid criticism – you’re likely to fall back into a “fixed” mindset as you think more about defending yourself, possibly doubling down, rather than considering the criticism simply due to the delivery.

It got me thinking more about where I experience fixed versus growth mindsets at work. I often encounter people (many my senior) that prescribe solutions to the problems younger engineers are trying to solve. In software, there are often many possible solutions. Why, then, do so many feel the inclination to tell others how to solve a problem? Why do they have such a difficult time inviting creativity and collaboration? My guess is the incentive structure, but ultimately, it’s person dependent.

Anyway – in many scenarios I feel I do exemplify the growth mindset. I’d like to do that more. Specifically, when I’m otherwise uncomfortable such as camping outdoors. I want my daughter (and potential future kids) to thrive in uncomfortable situations. It will make her tough… resilient.

I’ll need to become more resilient if I really want to start a business. I suspect, much like having a kid, that I cannot fathom the actual reality that is running a business. I’ve been in many leadership positions, but I’ve never carried much risk. I need to prepare to work through some tough times. I’ll do my best to build a business that’s sustainable, and thoughtful, but alas I’m a newbie. The experience is unlikely to be pain free.

I’m a new dad. My daughter (I’ll call her El) is just about a year old. The first year is tough. You really, really, don’t know what it’s like to have a kid before actually having a kid. Once you have a kid, you no longer control your life. You don’t control when you sleep, you don’t control when you eat, you don’t control when you go somewhere or where you go. Most importantly, you don’t control your time.

Time is a non-renewable resource for the individual. It’s one of those few things that equalizes all beings. We all have 24 hours per day. We all have to sleep some number of those hours per day. Granted, some people can buy more of their time back (e.g. the super wealthy). I am not one of these people. So, as a new dad, I am trying to find ways to maximize my time so I can achieve my goals. Even with a kid there are things I want to accomplish as an individual.

This blog is dedicated to that pursuit: becoming more effective so I can achieve my goals with the limited time I have. I have a full time job. I have a kid. I want to be present for my kid and to make her a priority. But, I have goals:

1. I want to stay fit and healthy by eating well and going to the gym.
2. I want to read more.
3. I want to start a business that allows me to leave corporate America.

Goals 1 & 2 are really forever goals – more like habits than goals. Goal 3 is really what I’m trying to accomplish. This blog will chronicle that journey. I will do my best to post as frequently as possible – if for nothing else than to document my thoughts for my children.