A Man for All Markets

Very interesting book. I learned a lot new things from the origin of card counting, beating the roulette with the first wearable device (with Claude Shannon!!!), beating the markets based on managing risk, etc. The author is truly remarkable.

It is interesting how Edward moved from Chemistry to Maths due to problems with fairness in this Chemistry “career”. And still he didnt find much fairness in Las Vegas, and even worse in the stock market. He was driven to solve problems people didnt think had a solution. And was impressive how he taught himself. And likely he was a pioneer in computer-based trading. He is against the low latency trading. He mentions many times Warren Buffet and his investment style. As well, Citadel, as his continuation about the management of risk. It seems he didnt look for the sort term profit but going long, looking for mis-priced stocks.

I am happy he doesnt believe in the efficient market neither.

The Panama Papers

This is a book that makes you to reconsider how you look at the “elite”. For me, paying taxes is one of the most fundamental part of a working democracy, and it is equal to trust and equality. And yes, we all want to pay less taxes. But if you knew everybody paid their part and everything was used properly, and you could live decently (imagine: good education, good health system, good infrastructure, etc) I doubt you wouldn’t do it.

With the Panama Papers, you can see how powerful is Mr Money. Everybody has their hands dirty: politicians (Kirchers-Argentina, Camerons-UK, Iceland, Russia, Ukraine, Spain, China, etc), banks (nearly all German banks), conglomerates (Siemens), artists, sports (FIFA, Messi…) And this is just the tip of the iceberg. Amazon, Apple, M$, etc have billions in tax heavens. This remind me to a similar book regarding off-shore investments where it said there are trillions of $ hidden from us.

I am still surprised this is still “legal” and main player/countries are still allowing it. If USA doesnt crack it down, then, there is still something “worth it” for some people there…. Looks like a lost battle. But still worth it. I hope you dont ever again cry for Messi, CR or any other “star”. Very likely they dont deserve you.

Still, I am happy there are publications like this. Well done for the authors.

Personal MBA

I have read this ebook recently. As it is in electronic format, I didn’t take many notes but it looks quite complete touching many subjects. The site is quite good and you can get a list of all recommended books.

The general idea is you dont have to spend a fortune in knowledge that you can get just reading several key books (buying or borrowing from a library).

I agree (high/good) education is becoming a luxury and knowing that there are alternatives is a safe-line.

I would read it again but in paper so you can have a physical reference in your desk.

Cloudflare backbone 2024, Cisco AI, Leetcode, Alibaba HPN, Altman UBI, xAI 100k GPU, Crowdstrike RCA, Github deleted data, DGX SuperPod, how ssh works, Grace Hooper Nvidia

Cloudflare backbone 2024: Everything very high level. 500% backbone capacity increase since 2021. Use of MPLS + SR-TE. Would be interesting to see how the operate/automate those many PoPs.

Cisco AI: “three of the top four hyperscalers deploying our Ethernet AI fabric” I assume it is Google, Microsoft and Meta? AWS is the forth and biggest.

Huawei Cloud Monitor: Haven’t read the paper RD-Probe. I would expect a git repo with the code 🙂 And refers to AWS pdf and video.

Automated Leetcode: One day, I should have time to use it a learn more programming, although AI can solve them quicker than me 🙂

Alibaba Cloud HPN: linkedin, paper, AIDC material

LLM Traffic Pattern: periodically burst flows, few flows (LB harder)

Sensitive to failures: GPU, link, switch, etc

Limitations of Traditional Clos: ECMP (hash polarization) and SPOF in TORs

HPN goals:

-Scalability: up to 100k GPU

-Performance: low latency (minimum amount of hops) and maximum network utilization

-Reliability: Use two TORs with LACP from the host.

Tier1

– Use single-chip switch 51.2Tbps. They are more reliable. Dual TOR

– 1k GPUs in a segment (like nv-link) Rail-optimized network

Tier2: Eliminating load imbalance: Using dual plane. It has oversubscription

Tier3: connects several pod. Can reach 100k GPUs. Independent front-end network

Altman Universal Base Income Study: It doesnt fixt all problems, but in my opinion, it helps, and it is a good direction.

xAI 100k GPU cluster: 100k liquid-cooled H100s on single RDMA fabric. Looks like Supermicro involved for servers and Juniper only front-end network. NVIDIA provides all ethernet switches with Spectrum-4. Very interesting.

Crowdstrike RCA:

Github access deleted data: Didn’t know about it. Interesting and scary.

Nvidia DGX SuperPod: reference architecture. video. 1 pod is 16 racks with 4 DGX each (128×8=1024 GPU per pod), 2xIB fabric: compute + storage, fat tree, rail-optimized, liquid cooling. 32k GPU fills a DC.

How SSH works: So powerful, and I am still so clueless about it

Chips and Cheese GH200: Nice analysis for Nvidia Grace CPU (ARM Neoverse) and Hopper H100 GPU

Narconomics

Very interesting book. It explains the mechanics of a drug cartel from the point of view of economics. I didnt think issues like supply chain, HR/PR, competition/merges, offshoring, R&D, online business, diversification, etc were part of drug cartel, as you only think of those as part of a licit business. There were many things that I didn’t know like the birth of “legal highs” in NZ (and Matt Bowden)

The goal is to fully understand the “business” because the current laws/actions, etc against drugs are clearly not working. So this way you can really offer a different approach to tackle the issue. You are not going to destroy them 100%. Most of the actions are at the source of the drug business: growing the plant (decrease in growing area causes minimum increase in retail price). But the book shows that is not effective and prevention (done in the consumer’s land: like rehab, education in jails, etc) is much more productive (for the same investment). As well as legalization (ie marijuana) as that brings control (“safer drugs”, tax revenue, etc) and put out of the market the dealers/cartels.

This is a difficult pill to swallow (punt intended) for governments and citizens but the writing is in the wall.

The Psychology of Money

Really good book. Easy to digest and even easier to take home. And need to watch this video too. And funny enough, I was watching a bit this video too (that is quite related – interesting the investing fund points, I need to review)

I highlighted a lot of sentences in the book and I think the summary below is too long but I still take the following as basic: save, get room from error, define what you want, get your freedom.

0- Intro

I think he is the summary of the whole book. He was a gast station attendant, janitor and investor who was over 8m$ worth when he died.

Financial success is not a hard science. it is a soft skill, where how you behave is more important than what you know.

Finance is overwhelmingly taught as a math-based field. But knowing what to do tells you nothing about what happens in your head when you try to do it.

We think Finance follows laws like Physics but it is actually guide by people’s behaviour. And that follows to next point, how I behave may be sane for me but crazy to you.

1- No One’s Crazy

It is easy to say a investment decision was good/bad looking back. We make money decisions based on the information we have in the moment and plugged into the unique mental model of how the world works at that moment. So yes, it can look crazy. And investing for the masses, it is actually something very new… so we are newbies, we like it or not.

Some lessons have to be experienced before they can be understood. So that can explain why looks like crazy if you haven’t gone through it.

2 – Luck and Risk

Bill Gates won the lottery attending one of the few schools in the world with a computer.. his friend Kent Evans died in a mountaineering accident. Both sides of the same coin.

Robert Shiller (Economy Nobel Prize): What do you want to know about investing that we can’t know? The exact role of luck in successful outcomes.

So we always read about the successful people/companies (extreme cases). What proportion of these outcomes were caused by actions that are repeatable vs the role of random risk and luck? So the questions is how to identify luck and skill.

So focus less on specific individuals and case studies and more on broad patterns.

To deal with failure, arrange your financial life in a way that those situations will not wipe you out you can keep playing until the odds fall in your side (room for error…) And be able to forgive yourself when judging failures.

Nothing is as good as bad as it seems

3- Never Enough

Enough: “Yes, but I have something he will never have… enough.”

I think that is another key about “wealth”.

The hardest financial skill is getting the goalpost to stop moving.

Social comparison is the problem here.

Enough is not too little: is realizing that the opposite, an insatiable appetite for more, will make you no good.

There are many things never worth risking

4-Confounding Compounding

There are over 2000 books written about Warren Buffer. But his success came from investing for over 75 years… His secret is time. That’s how compounding works.

Compounding is not intuitive so it is easy to ignore.

So good investment is about earning pretty good returns for the longest period of time.

5- Getting Wealthy vs Staying Wealthy

Million ways to get wealthy. But just one to stay wealthy: some combination of frugality and paranoia (a.k.a survival). So getting money and keeping money are two totally different skills.

I like the note about Jesse Livermore (I read that book some time ago). He made the biggest fortune ever during the crash of 1929.

And another quote from Nassim Taleb: Having an edge and surviving are two different things: the first requires the second. You need to avoid ruin. At all costs.

Be financially unbreakable: you will get the biggest returns, because you will be able to stick around long enough for compounding to run its magic.

The most important part of every plan is to plan on the plan not going according to plan (a.k.a backup plan or room for error). A plan is only useful if it can survive reality. And a future filled with unknowns is everybody’s reality. So it is anything that lets you live happily with a range of outcomes.

Conservative is avoiding a certain level of risk. Room of error or margin of safety is raising the odds of success at a given level of risk by increasing your chances of survival. This is something I think I understand but I need some clear examples in my head.

Optimistic about the future but paranoid about what will prevent you from getting to the future is vital: Being pessimistic is too easy.

6- Tails, You Win.

Another interesting notes about Heinz Berggruen. The great investors bought vast quantities of art. A subset of the collections turned out to be great investments, and they were held for a sufficiently long period of time to allow the portfolio return to converge on the return of the best elements. That’s all that happens.

Anything that is huge, profitable, famous or influential, is the result of a tail event (Walt Disney, Brad Pitt winning an award, Venture Capitals, AWS, iPhone, MicroSoft, etc). Tails drive everything.

Same in different ways: Few things account for most results (I think this is the easiest one to understand)

Military genius based on Napoleon: The man who can do the average thing when all those around him are going crazy. So that applied to investing is, most of the time today is not that important. What matters are those number of days where everybody is going crazy… so what do you do???

George Soros: It is not whether you are right or wrong that’s important, but how much money you make when you are right and how much you lose when you are wrong. You can be wrong halt of the time and still make a fortune.

7- Freedom

Controlling your time is the highest dividend money pays: control over doing what you want, when you want, with the people you want to, is the broadest lifestyle variable that makes people happy. Using your money to buy time and options has a lifestyle benefit that few luxury good can compete with. Most stuff we buy, means giving away most control of our time.

Most workforce today are not “labored” so we need to use our head, and it is not that easy to switch off, so we are constantly working with our heads, and then we are losing control over our time.

8- Man in the Car Paradox

No one is impressed with your possessions as much as you are. Humility, kindness and empathy will bring you more respect than a Ferrari.

9- Wealth is What You Don’t See

Spending money to show off, it is the fastest way to have less money. Wealth is an option not yet taken to buy something later. It requires self-control. And because it is hidden, we have few models to learn from. It is much easier to follow the instagram show-off.

10- Save Money

For me this is they key of everything, without savings few things you can do.

Building wealth is more related to your saving rate than income or investment returns.

The value of wealth is relative to what you need: high savings rate -> having lower expenses.

One of the most powerful ways to increase your savings is not to raise your income, it is to raise your humility: what you need is just what sits below you ego. Dont care about what others thing about you (and not just about money!)

You spend less, if you desire less, then you care less about others -> so that goes back to the title of the book… money relies more on psychology than finance.

You dont need any specific reason to save (car, house, holidays, etc): Savings without a spending goal gives you options and flexibility: ability to wait and opportunity to act = time for thinking. And that flexibility and control over your time is an unseen return on wealth. Savings at 0% earn rate can give you more in the sense of taking a lower pay and more satisfying job than you can think.

Intelligence is no longer a sustainable advantage (software eats the world). Competitive advantages tilt toward nuanced and soft skills: flexibility is a main one. Again, it is being able to wait for a good opportunity (career, investment, etc). So having more control over your time and options is one of the most valuable currencies in the world: Just Save it.

11- Reasonable -> Rational

Aiming to be mostly reasonable works better than trying to be coldly rational. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters at investing. Think of the fever. It is beneficial, but we fight it because it hurts! Minimizing future regret is hard to rationalize on paper but easy to justify in real life.

12- Surprise!

History is the study of change, is not a map of the future.

Scott Sagan: Things that have never happened before happen all the time.

Investing is a hard science. People making imperfect decisions with limited information.

The majority of what’s happening at any given moment in the global economy can be tied back to a handful of past events that were nearly impossible to predict.

History can be a misleading guide to the future of the economy and investment because it doesnt take into account the structural changes of today. For example, when did venture capital start? Before there was only (if lucky) risk aversed bankers.

Historians are not prophets. Things change.

13- Room for Error

The most important part of every plan is planning on your plan not going according to plan. This similar to an earlier point.

Kevin Lewis from Bringing Down the House: We have enough money to withstand any swings of bad luck (so you can fight another day)

Benjamin Graham: The purpose o the margin of safety is to render the forecast unnecessary.

Unknowns are always part of life.

Having a gap between what you can technically endure versus what you can emotionally endure is an overlooked version of room for error. Use room for error when estimating your future returns.

Charlie Munger: The best way to achieve felicity is to aim low. (and a paper)

Nassim Taleb: You can be risk loving and yet completely averse to ruin. If you have 95% chance to be right, be sure that the other 5% is not going to wipe you out.

Back to an earlier chapter, it is important to safe for the sake of it, for the unknowns.

14- You’ll Change

Long-term planning is harder than it seems because people’s goals and desires change over time. We are poor forecasters of our future selves. We really underestimate how much we will change.

So avoid the extreme ends of financial planning (expending everything vs saving everything)

Accept the reality of change and move on as soon as possible.

Charlie Munger first rule of compounding is to never interrupt it unnecessarily.

End of History Illusion: is a psychological illusion in which individuals of all ages believe that they have experienced significant personal growth and changes in tastes up to the present moment, but will not substantially grow or mature in the future.[1] Despite recognizing that their perceptions have evolved, individuals predict that their perceptions will remain roughly the same in the future.

Daniel Kahneman: “I have no sunk costs”. book

15- Nothing’s Free

Everything has a price even if you don’t see it.

You usually get what you pay for. Same for markets. The volatility/uncertainty fee (the price of returns) is the cost of admission to get returns greater than low-fee investments (ie: money in the bank, etc). Ticket to Disneyland vs local fair. You need to convince yourself the market’s fee is worth it. So find the price, then pay it.

16- You & Me

This relates to point 1 “Nobody is crazy”. This relates to economy bubbles too. The assets have one rational prize in a world where investors have different goals and time horizons. And that can trigger bubbles, when the momentum of short-term returns attracts enough money that the makeup of investors shifts from mostly long term to mostly short term. Then the process feeds itself on and on until it can’t be maintained. So find which game you are playing.

17- The Seduction of Pessimism

Optimism is the best bet for most people because the world tends to get better for most people most of the time.

Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way.

But Pessimism sounds smarter and gets more attention. why?

Based on Daniel Kahneman: It is the asymmetric aversion to loss in the evolution: losses loom larger than gains. Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce.

And again relates to point 1 “nobody’s crazy”.

As well, bad news about economy can affects everybody so you pay attention.

Progress happens too slowly to notice but setbacks happen too quickly to ignore.

And finally, expecting things to be bad is the best way to be pleasantly surprised when they are not.

18- When You’ll Believe Anything

Stories are the most powerful force in the economy. Imagine venture capitalist that put money in things dont exist…. Another example in 2009, when we stopped believing house prices would keep rising.

The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true. For protecting you about that, you need a bigger gap between what you want to be true and what you need to be true to have an acceptable outcome.

Everyone has an incomplete view of the world. But we form a complete narrative to fill the gapgs.

Daniel Kahneman: The ability to explain the past, gives us the illusion that the world is understandable. It gives the illusion that the world makes sense, even when it doesnt. And that produces big mistakes.

My Summary

To be h

The Black Swan

I finished this book a couple of days ago. Very interesting. It is about how not linear or logical are philosophy, economics and life. About how we try to find logic/causality to everything. How history only teaches what we have only discovered. How we can’t predict properly, and much less financial market using Gaussian and Bayeasian models when these are non-linar systems, how we should run away from “experts”, how the academy is built in a status-quo that can’t be refreshed. It is intense, it touches a lot of subjects. And sometimes I feel I get it, and later on I am not sure. Examples like the turkey that is feed for 100 days, and very likely “thinks” that will last forever, until without knowing, Thanksgiving comes, are brilliant. Similar examples for Casanova (who survived any type of incident) and NYC (like Casanova but at city level).

A black swan is considered something very unlikely to happen that actually happens or similarly, that something very likely to happen, it doesnt.

The book was written in 2007 just before the 2008 financial meltdown so its attacks to the “risk” management can’t fit better.

It uses references from Daniel Kahneman who some years later wrote a great book about how we (badly) reason. And won a nobel prize in Economics… funny enough, that’s a prize who Nassim attacks a lot around the book. As well, I enjoyed the part regarding the application of chaos theory/fractals from Benoit Mandelbrot (that I read from his book) in the markets. He mentions many other authors like Karl Popper (whom I have never paid attention), Herni Poincare, etc. As well, he mentions Godel.

The entries about Skepticism and Empiricism are really great. From how started, how it is related to the black swans and how Medicine killed more people than cure them until not long ago. And when I was reading about Sextus Empiricus, I wasnt sure if he was joking, but I was really surprised by the discovery of this philosopher/physician.

I think I need to read it again.

Chips Water Innovation

This is a bit old news. But I found interesting the connection between chips manufacturing and water. And this is brilliant.

I want the world to be dependent on me, but I don’t want to be dependent on anybody else.” I don’t think it’s going to happen.

As well, I left for granted that all innovation for COVID vacciones was just miraculous, but it seems it was something feeding from successful innovation strategies.

So moving forwards, and I guess that should be valid to any country, you need to invest in innovation, R&D. It is expensive but it is worth long run. See TSMC.

The Ascent of Money

Somehow I had low expectations about this book, but I have been totally delighted with it. It is one of the best books (mainly in economy) I have read recently.

It is about about the evolution of finance in the world from the small tablets in Babylon to today’s crypto-currencies.

The shows how the economy development in the world started to speed up when the Spaniards starting to bring tones of silver (Potosi) to Europe (and obviously they didnt make the most it). Still the economy was based in hard currency but after this ,banks, insurance, stock exchanges, bonds and other financial products started to develop in Florence/Venice (Renaissance), Amsterdam, London and Paris. Still early advances were done in the Middle Ages like the case of Fibonacci who wrote the formula to calculate the compound interest of an investment.

I liked the reference to Mary Poppins film regarding a bank run. I actually didnt remember the movie very well but was interesting to make sense to the story.

As well, there is basic example showing how money is created based on debt (based on the fact that the banks dont have to keep your deposit only a small percentage).

It is clear that we dont have that much info about the economies of 4000 years ago but based on the book, the finance has evolved like a living thing. It has become more and more complex,like us, with time. And each crisis has improved it. And each main empire, kingdom, etc in history was strongly connected to an advance it is financial/economy system.

As well, there are good references about finance and war, like the America Civil War, WW1, Napoleon wars, etc

Another topic that was very interesting is the creation of welfare systems (and how different are some of them like Europe, USA and Japan) and the evolution of the pension system. I was really surprised about the example of Chile (when it become a dictatorship) as the first country introducing the private pension system that has been exported to many other countries (Idea from Milton Friedman) And how Argentina was one of the top 10 economies in the early XX century and how things turned sour and became a defaulting machine.

There is a big part of the book focus in the subprime crisis, from the origins, development and aftermath. It is interesting that one of the factors was the “democratization” of home ownership in USA that helped to create the bubble. And how really globalization has made the world not as strong as we thought.

I have managed to make connections to other books I have read before about politics, psychology and economics so it is interesting to see similar and different opinions in several subject (mainly the subprime crisis)

As well, this book was initially published during the Subprime crisis of 2008 and the revision I had, just added two new chapters for the years up to 2018. The final part is mainly about the relationship USA-China post subprime (and Trump), Europe (Brexit), how China is taking the lead in financial technology (so that means they will (or already are) the next empire) and the explosion of crypto-currencies.

Good2Great

I finished this book during the week. It is about how good companies became great ones. They set some tough requirements as 15y performing below market and then after a transition point, 15y performing three times above market. The book was completed by 2000 so just in the middle of the .com bubble so I would be curious what the result would be now (and after the subprime crisis in 2008). And all of them are companies trading in USA and public markets. As well, for each candidate there is a counterpart to demonstrate how two companies in similar circumstances, became one great and the other not.

To be honest, from the eleven companies passing the exam, I knew five: Gillete (shaving stuff), Kimberly-Clark (paper based things), Phillip Morries (tobacco), Fannie Mae (mortgages, that collapsed in 2008 crisis..), Wells-Fargo (bank). And I was surprised for the lack of other big names.

It is interesting the history of each company and most of them related to very different sectors. So there is no really lucky strike as the study covers nearly 30y history of a company.

So the goal is to identify the traits that all these great companies had to made that transition.

The book treat the following points in each chapter:

  • Level 5 leadership: Leaders no super-stars. They are ambitious about their company and not just during their tenure. I like the example of those CEOs, people who didnt have big head and just looked through the window to explain their success. So it is that mix of humility and will that “create” them.
  • First Who, then What: Your biggest asset is the good people, no just people. So having the best ingredients and knowing how to use them, you will get a great meal. As well, you need to get rid of the no good people. This is something the level5 leader has to accomplish. So hiring is a critical part (or have the process to form these people) and dont hire until you have your candidate. And looks like money wasnt the main thing to get or maintain the good people in your bus, comparing with the counterpart companies.
  • Stockdale Paradox – Confront the brutal facts, yet never lose faith. This is based on the experience of a Vietnam war prisoner. “The optimistics” were the ones who didnt make it out. All these companies faced a challenge that after passing it, became great. They didnt ignore the reality but believed they could go through.
  • Hedgehog Concept: This is the concept I struggled more to understand. This is based in the hedgehog and fox paradox. In summary, the fox tries many different things to hunt the hedgehog, but the hedgehog always sticks with the same plan (become a spiky ball) to defeat it. So this is based on Keep It Simple Stupid (KISS) from my point of view. So see the complex world and simplified it, you focus in the essential and ignore the rest. From the business perspective this translate into the three circles:
  1. What you can be the best in the world at (and what you can’t be the best too)
  2. What drives your economic engine:
  3. What you are deeply passionate about: This is not just get passionate about something, you need to have it before. Wrong example.
  • Culture of Discipline: If you have that, you dont need hierarchy and motivation. This is based on disciplined people, disciplined thought and disciplined action. Two interesting points in this chapter are
  1. Budgeting: Based on the hedgehog concept, it is just decide what areas to be fully funded and what not at all.
  2. “Stop doing” list: Again, this is another point in just focus in the important thing.
  • Technology Accelerators: You would think that technology made some companies great. But the summary here is, technology was just a tool. You buy the technology or develop it to stick with your hedgehog concept.
  • The Flywheel: “Revolution means turning the wheel”. So you need to push the flywheel. At the beginning is hard, but with time, once it gets momentum, get easier. So this is based on a compound investment of effort, and there is no miracle involved. And the results will speak by themselves. This contrary to the doom loop where you avoid the buildup, just implement big/radical programs, without thinking.

And what after being great? It is to last as great. This is another book from the author that was written before this one about this concept.

So, based in the book, all these concepts make a great company, but it is not the recipe to last forever.

Gillete was merged by P&G in 2005. Fannine Mae didnt do very well during the mortage crisis in 2007/8. Tobacco is not healthy business, etc.

In summary, interesting book, as I used to think only the “big” corporations, famous CEOs were great companies (at revenue level) and here you can find more successful companies (at revenue level) with much less glitter around beating them very badly those for long runs.