iPhone Diary Review

• writing allowed me to create concepts too large to fit all-at-once in my mental

• lack of patience sitting in my positions

• inexperience with high volatility

• inconsistencies between long-term view and short-term positioning

• failure to identify and articulate my edge

• trading based on the 15m chart

I wrote most of my iPhone Diary while experimenting with scalping and swing trading: a search for low timeframe, low conviction, poker-like, repeatable setups. It allowed me some insight into how CT chart-readers view prices.

This sort of approach to the markets doesn’t suit my personality; I disliked being glued to the price chart, forced to babysit for entries or exits. My positions would get blown up if fundamental news came in which I failed to monitor. I prefer thesis-driven, long timeframe investing; it frees up my time and allows me to exercise my hobbies of (1) pondering the manner of things and (2) forecasting individuals. This becomes a virtuous cycle.

The crypto markets are maturing rapidly. For now, I cannot hope to compete with quantitative traders in whale games. My sole edge lies in:

1. fringe, unknown opportunities

2. low-liquidity environments

3. having a long-term outlook

Finding a fringe asset is always a boon — the possible change is skewed towards more attention rather than less. Greater attention tends to mean higher valuation. If something is low-liquidity, sophisticated actors can’t enter, so competition is softer. With a long-term outlook, which requires an ability to stomach common emotional pitfalls, the competitive pool shrinks once more.

My main heuristic is: “Would I join this opportunity? Would I lead this project?”

To take a page from Howard Marks, I’ve given up on directly timing the market. My only goal is to allocate into quality projects and teams when I feel like the price is cheap. To align with my personality and attain focus, I’m long-term long-only, with a strong bias towards opportunities which have the potential to return multiples — in short, I’m positioning myself to be an angel investor.

Physical Notebook Review

• betting is committing money, getting more back when you correctly predict an uncertain outcome, and less back when you are incorrect

• trading is betting on how prices will change

• investing is

  • betting that an entity will somehow improve, and that its market valuation will therefore increase

  • aligning our payoff function with that of someone or something

  • surfing a wave

  • planting trees for their fruit

  • sacrificing now in the hope of receiving more later

  • like a poker game where entities compete to accumulate relatively more wealth

  • understanding that the underlying is different from the price

• human life is moral-mental-physical

Overall Takeaways

• we have a limited decision bankroll

• make sure we’re always vibing with our positions

• what would you do if you absolutely believed in yourself?

• it’s okay for a man to be wrong; it’s not okay for a man to stay wrong

• play some NLHE/OTC every night to train risk-taking under uncertainty

It takes years to get feedback when angel investing; how can I battle-test my ideas, iterate my mental toolkit, train myself?

So what do I want to be at the end of this growth process? What’s the description of my skills, who I am?

• healthy

• an effortless wealth-generator

  • my skill level and systems are so excellent that earning wild chunks of capital happens essentially of its own accord

    • artful blend of quant and discretionary, generically applicable to any endeavor involving risk or warfighting

My latest approach to (1) engaging in focused work to accomplish a singular goal while (2) satisfying my curiosity and the explorative side of the multi-armed bandit problem is through following these basic heuristics:

1. health

2. focus

3. simple

As long as, every day, I do quality work on these three things, the rest of my time can be spent on whatever random curiosity I want.

Health is the top priority because, like it or not, physical wellbeing is the foundation of everything else in my life.

Now is my time to concentrate on winning the wealth game in order to attain socioeconomic independence, to get a seat at the poker table of capitalists. Focused work on my trading systems and investing in myself, with a bias towards simplicity, is what I’ve identified as the most effective non-ergodic play.

For me, this introduces so much friction that I fail to accomplish nearly as much as I’m capable of.

Moving forward, we’ll try new things, keep what works, and discard what doesn’t. Rinse and repeat.

• one is intended as a dialogue, to clarify and simplify my on-the-fly thinking

• one is intended as a static building, to preserve ideas in some ideal state

For a while, I was continually frustrated because of self-inconsistency; I implicitly wrote with different goals but subjected all my writing to the same bar of “finished, polished, static product which will last the ages.”

I’ve found that my writing is scattered in different locations; this is because I mostly find time to write in non-ideal situations — away from my mechanical keyboard and centralized sources of truth, scribbling on a notepad or bopping at my phone screen.

The nature of what I’m attaining out of life (being an excellent, pragmatic practitioner) means that my writing is primarily a dialogue tool for internal improvement. No need to stress about careful polishing and curation of “perfect” works. What matters is how this process guides my internal formation.

random notes

• in the wealth generation game, begin playing Monopoly rather than poker as soon as it’s financially feasible

• your mind will always improve at what you apply it to; whether it’s riding a bike, deepening a toxic relationship dynamic, or attaining excellence

Ideally, I can talk to anybody I wish — historical figures, billionaires, great leaders. This this isn’t currently possible, but I can leverage technology to immerse myself in visual and auditory content to the point where my monkey brain believes my immediate community is one of such excellence; it’s mundane and normal for the people surrounding me to perform beyond the highest possible levels.

• I’m missing out

• I’m getting left behind, I’m slipping behind

• I’m not involved in something which might help me attain what I desire

• there’s a party going on which I’m not invited to

• there’s a euphoria which I’m tempted by

In a martial context, succumbing to the equivalent of FOMO is a decisive error — being emotionally manipulated by the enemy into a tilted decision-making framework. Scattering supplies and valuables as bait to exploit enemy greed has been historically successful. Making a move or decision for any reason besides “this will lead to victory” is an exploitable mistake. Sima Yi held steady despite Zhuge Liang’s taunting him with a dress.

Acting on FOMO, or any emotion, is undisciplined. Boiled down, having FOMO implies that one is unfulfilled. One is not content with oneself; some external factor is aggravating an internal dissatisfaction. If the dissatisfaction weren’t there, the external factor would have no hold on me.

This reminds me of a passage from the Dao De Jing:

Be content with what you have; rejoice in the way things are. When you realize there is nothing lacking, the whole world belongs to you.

This is interesting to me, because my understanding of my societal narrative holds that only the chronically dissatisfied are high-achievers. Yet it appears that (and this is also prompted by my finishing Grit by Angela Duckworth) with any meaningful endeavor in life, effective striving in the long-run is done best with a respectful and supportive emotional headspace.

I’ll think more about this one.

http://paulgraham.com/paypal.html

What stuck with me was PayPal’s “extreme bias towards action.” As someone who enjoys planning and strategizing, it can feel frustrating when I don’t get anything done because I spin my wheels for too long. Reading and writing, I’ve found, are no substitute for doing.

What also resonated was the enforcement of extreme focus: Thiel would only discuss #1 priorities, and refuse to talk about anything else with employees. I hate to admit it, but I think this level of focus is the only way a human can get any sort of meaningful work done.

Extreme focus, extreme ownership, extreme resourcefulness, transparency, and a ruthless meritocracy: this is needle-sharp in comparison to most companies.

When working on trading, the line between action and overthinking feels blurry, but I’ve delineated the worth of some activities:

• developing helpful software systems is assuredly productive action

• designing written, data-driven heuristics is assuredly productive action

• creating ways to satisfy my curiosity is assuredly productive action

It’s harder to determine the relative value of diverging across the internet on my constant treasure hunt for quality thought, or of consuming unfocused content for pure entertainment: both activities have uncovered mental frameworks which provide outsized returns, but it’s untenable to suggest that such activity directly contributes to any focused goal.

Ideally, my market observations and orientations improve in quality so much that I make quality decisions almost subconsciously.

Learning SQL will be too much additional friction. The NoSQL database I’ve had the most experience with is MongoDB. I found:

• a cheap MongoDB database plan from ScaleGrid

• Arctic, a currently maintained OSS Python library for uploading timeseries data with 2.5k stars on GitHub

I just want my collected data to be fresh within ~15 minutes for backtesting. My requirements for data storage are thus:

• cheap overall

• robust, so the data doesn’t get lost

• easy-to-query repeatedly

• easy-to-upload new data

My requirements are currently NOT:

• lightning-fast uploads and queries

• low-latency, nanosecond optimization

I don’t need any scaling requirements as of yet (I just want to start out with funding rates), but I need to have an eye to the future ramifications of my current design decisions.

Looking at ScaleGrid’s current pricing plans, I’d need to upgrade once I reach storage requirements over 18 GB. What will it take for me to reach this point?

• from ByBit, the platform’s October 1, 2021 ETH transactions in CSV format is ~2 MB

• given that 1 GB is 1k MB, I can store ~500 days of all daily ETH transactions per GB

• this means I can store 9k days of all daily ETH transactions, or 24 years of data

At some point, if I somehow begin to outscale the size of my MongoDB cluster, I can simply download the data into CSV format then clear the MongoDB. I can compress and store the files on Kaggle or in my Columbia Google Drive for later backtesting.

The conclusion is: sign up for the ScaleGrid plan, and store whatever data I want. I’ll design the backtesting system to query from MongoDB for now!

• prevents my creating an ever-increasing backlog of writing friction

• moves me relentlessly onwards

• preserves the inherent gift of writing: giving a clear overview of my thoughts to tinker with

On October 21, 2021, I exited all positions. My portfolio has been completely flat since then. My reasoning was as follows:

LOBS have little to no activity on OpenSea and the DAO appears to be apathetic. I was hesitant to sell because of the lack of liquidity and strange self-refusal to book a significant percentage trading loss. However, market dynamics and fundamental thesis falsifications have tipped my hand.

The market as a whole, in fact, feels to me like an environment which has outgrown my process. And to take a page from Paul Tudor Jones, it’s always far easier to get in than it is to get out.

Would I scale into my current portfolio at these prices, market dynamics, and with my current decision-making process? No. I think the most effective thing for me to do, right now, is exit all of my current positions and start over with a blank slate.

Decision: market-sell all liquid holdings. For the LOBS, wait until EOD and take highest bid if current ask untaken.

I did not develop clear falsifications for the LOBS purchase. This is partly because I had no real idea what to look for, or what to look at — I had no observations or orientations for NFTs to work with. After closely following (1) the market with OpenSea and Nansen and (2) the DAO on Telegram and GitHub, I lost faith in two respects:

• the first was that market activity had been dying in both volume and price

  • on Crypto Twitter, there was little to no mention of LOBS, which in my mind meant that there were not going to be any new buyers outside of the LobsterDAO community

• the second was that the DAO seemed to be rent-seeking and ambivalent

  • the de facto leadership of Ivan was ineffectual because Ivan didn’t want to appear as leadership (probably because of regulatory fears)

what went well

• i informally identified two falsifications:

  • market activity winding down into stagnation

  • the DAO demonstrating a lack of widespread initiative and no clear direction, with little buy-in/participation from the vast majority of LOBS holders

• i developed an exit plan and stuck to it, while keeping a close watch on whether the plan might be modified or improved

• i have a visceral, gut-wrenching understanding of what it means for a market to be illiquid, and feel like my view of more liquid markets has changed markedly

what i want to do better next time

In the future, before entering a market, I want to make sure I understand the specific dangers and dynamics of the market, as well as have a mental model of what historically happened in related or similar situations.

I want to be self-aware and mindful. I want to ensure I only enter trades in which I have some provable, tangible, concrete edge. I want to ensure I only enter trades which are suited for my portfolio and my economic positioning. I want to ensure I only take a trade because I’m bullish on the trade and believe it will be a profitable decision.

I want to ensure a diplomatic immunity to FOMO. Everybody gets what they want to out of the market, and I’ll take the consistent feedback as a means to identify and exorcise any personal demons.

This is entirely a mental game, and à la CGP Grey, the best way to correct the mental state is by beginning with the physical — yoga and meditation.

Selling the whole portfolio, largely motivated by an emotional reaction to a large loss, was perhaps unwise when considered as an isolated incident.

Selling the whole portfolio, at a meta-level, was good. I took a step back from the market, while I was wholly bullish with a large margin of safety on my liquid positions, because my process (endlessly scrolling crypto twitter) was one which removed my own agency and turned me into a reactionary machine largely consuming manipulative and manufactured content. Continuing to benefit from my process, in the long run, was a damaging habit to reinforce.

Crypto is a generational opportunity, yes. But I can’t continue believing that the only meaningful wealth-generating opportunity I’ll ever have is buying cryptocurrencies earlier than the rest of the world. I especially can’t continue living with a scarcity mindset while my thinking isn’t independent and focused.

I need to realize that the world is full of abundance — and that there is essentially infinite opportunity in financial markets alone.

The goal is to continually increase my capacity for independent action. I focus on the long-term, developing wisdom and refining my decision-making + leadership skills. I anticipate this will be much like the Bible story concerning Solomon: God gave Solomon the choice between wisdom or riches, and Solomon chose wisdom. God was then so pleased that he gave Solomon both.

My systems, my technology, and my processes need to serve me and give me the initiative. Not the other way around. Mirror as a writing platform feels near-ideal in terms of facilitating my desired writing experience: a blank page every time, yet with an immutable linear log. It feels like a fresh, running river rather than a stagnant pool.

I’m prioritizing work on the systematic/quant/computational side of my trading. I’ll also concurrently run discretionary, thesis-driven trades once I create data-driven, mathematical foundations for my view of the market. The systematic and discretionary projects will complement one another.

My ideal trading system is one which provides seamless, fluid Observe and Orient capabilities. Better observations and orientations will inherently improve my decision quality; taking action involves a simple button press and subsequent sitting on my hands. The current limiting factor in a trading/investing OODA loop is thus almost always the OOD. My current bottleneck is the OO.

Here’s a quick brainstorm of some desired features:

• collect market data into own database

  • provide daily notifications of collection progress + summary

  • constantly update the relevance and relation of data streams to the market

    • funding rates, yearn borrow rates, aave borrow rates, etc

• fluidly view + inspect graphs of historical data in parallel to look for patterns

• have a number of statistical tools at easy disposal

  • generate correlations between data

  • plug in trading backtests for any indicator set on a Unix timestamp

• monte-carlo simulations of prices and different regimes

• simulated market with market makers, informed traders, uninformed traders, etc. to test supply and demand shock effects, compare against historical situations with the same parameters

  • test relative performance of different strategies in simulated market

• “How has this wallet performed trading-wise?”

• “Is this the sort of market regime where I can profitably market-buy every breakout?”

• “How much of this token is locked up right now? What happens when the tokens are unlocked — what have wallets historically done? How will I know when the tokenomics change?”

  • “Where can I see and easily update my knowledge base, like poker player hand notes, for any given project?”

• “Am I bullish or bearish on this opportunity right now? Why?”

• “Would I make money on this in 9/10 worlds?”

• “How much of this activity is driven from retail? From smart money? From institutions?”

• “How many marginal buyers are remaining? Who is the marginal buyer? Who is the marginal seller?”

• my original thesis for buying a basket of L1 tokens, which included $ATOM, was

  • there’s a chance that some smart contract blockchain platform becomes the consensus layer for socioeconomic activity

  • given that we can’t know the future, the name of the game is to avoid missing out on winners à la venture capital

• $ATOM has been seriously lagging in comparison to other non-ETH L1s since my allocation

  • based on Market Wizards, i believe in the trading principle of cutting losers, especially when the crypto market as a whole has been trending upwards

• further, when looking at Total Value Locked across all chains tracked by DefiLlama, $ATOM doesn’t even reach the bottom of the leaderboard

  • besides $ATOM, the L1 i’m holding with the least TVL capture is $MATIC, yet $MATIC still has 2% of all blockchain TVL

• my trading mentor believes that $ATOM has no value capture, and a cursory glance over these articles attempting to shill $ATOM convinced me of this

  https://blog.cosmos.network/deep-dive-how-will-ibc-create-value-for-the-cosmos-hub-eedefb83c7a0

  https://figment.io/resources/what-makes-the-cosmos-hubs-atom-valuable-not-just-transaction-fees/

  https://medium.com/kysenpool/intrinsic-value-of-cosmos-atoms-6e4824840c97

  https://github.com/cosmosdevs/atom2021

• does this invalidate $ATOM from the lens of my original buying thesis?

  • yes, because even if the Cosmos ecosystem becomes the go-to layer for blockchain social consensus, $ATOM doesn’t have mechanisms to capture the value

decision

• sell my $ATOM holdings

• loss of 6% on a ~2% bankroll allocation

I can see future worlds where LobsterDAO NFTs are worth much more than their current floor price. This is because the NFT allows you to have access to the DAO voting, and to potentially receive future airdrops.

LobsterDAO NFT airdrop holders are among the most knowledgable, talented, and motivated actors in crypto. They’re likely going to be gunning for value accrual, and at least some of them will engage in development activity which maximizes the price of their new airdrop. Buying an NFT is a means to better align our payoff function with those of an intelligent community.

The buy argument when only considering cashflows is interesting because of the royalties aspect (https://dune.xyz/vsh/Lobsterdao-Royalties). The collection has been dropped for around a week now. The volume on OpenSea is 990 ETH, which with a 7.5% royalty fee and artist cut translates to ~51 ETH for the DAO to play with. This is around 7 ETH per day.

(Very) conservatively assuming daily 7 ETH volume continues for around a month, an additional 210 ETH will accrue to the DAO. This translates to ~0.08 ETH per month per each of the ~3k non-DAO NFT. At a floor price of 3.89 ETH, this is an annualized return of 24%. Of course, this isn’t direct value accrual, because a single LOBS has minuscule sway over the DAO treasury. But larger players may want to accumulate, as buying floor LOBS cheaply increases their voting power. Larger players may also be incentivized to fabricate LOBS buying, which increases volume.

Bear take: the art, in general, is ugly. Nobody wants to buy the art for aesthetics. There’s also the constant overhang of the NFT bubble potentially popping soon: at a macro level, it’s a greater fool’s game of hot potato. Further, potential loss is near 100% (because the NFT marketplace is illiquid) and in the event of a bubble bursting or the speculative social consensus valuation collapsing, there may be sharp downturn.

This trade will go horribly when the actual NFT art is released and nobody wants to buy the common pieces, which is our overwhelmingly likely drop — in fact, current prices might be trading at a premium because each NFT is potentially a lottery ticket to mint a rare LOBS. After reveal, common prices may dump.

There’s status attached to the NFT, which in my mind is bearish. Owning a LobsterDAO NFT airdrop affirms you as a valuable contributor to an esteemed community. Buying a LobsterDAO NFT is almost like trying to pay-to-win, or trying to pose with a token of intelligence. There’s little incentive to buy for status because doing so outs yourself as a fake, non-airdrop NFT holder.

After running through a number of full-Kelly calculations, only a few optimistic estimations result in enough portfolio allocation to cover my purchasing a floor NFT. And even those cases are invalid, because I consider using full-Kelly to be inadvisable.

Day of October 13, 2021:

• i noted that the floor price for common drops had fallen from 3.89 ETH the night before to ~2.5 ETH

  • this potentially validated my idea that people had been bidding the unrevealed NFTs higher with lottery ticket-like hopes of catching a rare

  • the cheaper price made it more appealing to enter, due to its reaching my distribution of calculated Kelly Criterion percentages

• once i noticed that there seemed to be steadily increasing buying activity on opensea, combined with my reading my bear case repeatedly to assure myself that i’d keep invalidations in mind, i bought a floor NFT

• on reflection as of this writing on Oct. 14, i realize that my earlier calculation of the ETH accrual to the treasury was incorrect because i assumed that the total volume was the daily volume

Performance Journal

What did I do well?

• i did a good job of providing myself with an orienting framework for the potential opportunity, as well as of potential dangers i could imagine

• i did a good job of consuming appropriate information sources to formulate my decision in-the-moment

• i did a good job of adapting as circumstances unfolded, and of rapidly executing once the decision was made

What do I want to improve on for next time?

• honestly, given the timeframe in which i was given to assess this opportunity, my process was pretty close to ideal

• next time, to be even more ideal, i will have more effective and accurate mental models of (1) timeless strategic archetypes and (2) specific situational awareness

play-by-play summary

• saw a tweet from Qiao Wang or some fund manager showing the first leg of the SHIB pump

• i figured that this was just a whale market manipulation play, especially after seeing another tweet showing how much SHIB was moving on-chain

• on more thought, i reasoned that because pretty much every major L1 had been moving up recently, the market sentiment might be getting meme-level bullish

  • NFTs, of course, were still exploding into insane multiples of their initial prices

• i was skeptical of how far this pump would go, especially because i hadn’t seen much retail activity recently

• but because of the general market sentiment, i figured this would become like a hot potato Keynesian beauty contest, where people buy dog coins to try dumping on (1) reflexive pumps from traders with the same idea and (2) retail investors FOMO buying

• partly due to my liquidity deployment situation, i decided to position for this possibility by entering DOGE with a 1% portfolio allocation

• entered at 2PM EST with a market buy (i was impatient, possibly because DOGE had already showed signs of strength) at 0.229

• sold at 0.24 at 11:47PM EST

  • i’d been periodically looking at DOGE versus SHIB (and also L1 majors) and noted that DOGE was a laggard relative to the overall market strength

  • this made me skeptical that it would rip up any further

  • in the back of my mind, the information i had for DOGE was some vague blog post about how DOGE is largely concentrated on just a few wallets, and thus i was wary of the price’s ability to meaningfully rip due to this idea i had of there being a natural seller

process journal

• i’m looking for a solution to create, at scale, accurate mental notes concerning (1) every potential coin’s holder distributions, (2) tokenomics of buying/selling pressure such as staking or lockups or inflows, and (3) the behavior of different wallet sizes during different market regimes

  • in my mind, this is similar to having a poker player’s hand history before fighting them for pots

• i did a good job of sizing properly with a small percentage of my portfolio given my level of conviction and amount of due diligence

• i did a good job of actionably reasoning with my theoretical knowledge base, and of looking for disconfirming evidence for my trade rather than trying to justify a losing position

• i did a good job of contextualizing events and market moves in what recently has been happening in the metagame of crypto trading

Effectively, we’re already dead. From a long-enough perspective, everything in the physical realm is going to zero. The only thing we can claim is our immediate moment of experience.

In view of this situation, my current code of life is to minimize my regret and maximize my authentic self. The specific expression of this min-max is as follows:

• i want to have total control over my time and how i spend it

• to get there, i plan to accrue enough societal power such that others do all the work to provide for my lifetime needs and wants

• wealth growth is the most effective means to this end

  • money is an abstracted social power credit which makes my life independent from having to play incentive games imposed by others, and which allows me to impose incentive games on others

  • productive assets are inherently useful to own

I’ve been interested in markets for as long as I can remember. It’s a permissionless arena where, by consistently exercising effective judgement and decision-making, I can become fabulously wealthy.

My level of experience and ability is nowhere near where it needs to be if I’m going to generate my target wealth from trading. Given the continuously increasing difficulty level in markets, my chosen path is subject to the Red Queen effect.

In my pursuit of becoming a winning player in the never-ending poker games of life, I find it useful to write and crystallize my thoughts for the sake of more effective mental programming.

TLDR; this is a log of my progress in leveling up as a shot-caller, starting with a focus on crypto markets. I’m pushing my Sisyphean boulder every day.