Category: Articles (Page 6 of 14)

How I Use Twitter – Who I Follow and More

January 30, 2021 / David Alade

As I cross 3,000 followers on Twitter today I am reflecting on the journey down here and the good tidings it has brought me. When I started using Twitter seriously, I thought I needed at least 10k followers before I could start to see its dividend. I was wrong. When I started, I had less than 300 followers and wondered how on earth can my voice be heard in this universe of 20 seconds expiring tweets. Then my last question was how will I always have something to say. As it will turn out, I appeared to have mastered a lot of things and got exciting dividends.

The journey from 300 to 3,000 was interesting, to say the least. So here’s not how I got the following but how I use Twitter.

First, I unfollowed

The first thing I did when I realized that I will be spending a lot of my hours on Twitter was to curate my fields. I couldn’t help it seeing all that I was seeing before then every day. It was either useless to me or toxic. I’ve always been the type that optimizes for knowledge. Anything less than knowledge is a waste of time if I will be spending that many hours. And that’s about 3hours daily on average.

So what does this curating my fields entails?

I started with unfollowing everyone that I do not understand why I was following them in the first place. Yes, for me then, if I can’t point to a reason why I followed you, I unfollowed immediately. Sometimes back, I’ve followed some people in a “follow for follow” request, they were the next I unfollowed after those I couldn’t tell why I followed them. How did I know them?

Here’s a thing I noticed on Twitter, those who do “follow me I follow you back” don’t have the kind of knowledge that I’m looking for on their timeline. And I don’t say this to diminish anyone. It is just an observation as it relates to what I am looking for. So all it took to figure out those to unfollow next was to check their timeline and I will be sure to not find anything other than some RTs and comments asking for a follow back. To be candid I wonder why the following matters to anyone if they are not offering some sort of value in return. Well, we are looking for different things.

The category of those that I unfollow goes on and I am still not done. I also unfollowed every corporate account that is not innovative in their engagement or that I have nothing to do with. I didn’t follow any influencer that doesn’t make me more intelligent. I don’t follow those with large followings already. Especially those who I can’t escape whatever they post whether I follow them or not. A good example of this is @dmuthuk. I like his content a lot and even though I don’t follow him, not a week goes by that I don’t see him on my timeline. By my estimation, if I follow him, I will be seeing too much of his content and I don’t want that. Yes, I am that deliberate. It’s the reason why I get better with every hour that I spend on Twitter.

You see, every follow you make on Twitter is a contract you are making for your thinking to be challenged. It is a contract for your life to be shaped. It is a contract you are making for you to be influenced. If that’s the case, you can as well choose to be deliberate about the kind of people that challenge your thoughts, shape your life and influence you.

Unfollowing is not enough, you have to deliberately follow as well. Some of my followers have told me things like they unfollowed everyone that they follow to follow everyone that I follow. There is brilliance in that. It took me about 6 months of aggressive curation to come up with my following. And I’m still working on it, improving with more following and more unfollowing.

For those who may want to follow those that I follow though, there’s a caution. It’s not the most effective way but I won’t dismiss its effectiveness. Like I mentioned earlier, every person I follow has a reason. Having such a reason for me is the height of optimization. You should get there.

Those who do that also do so because they want to have a sneak peek into my information digest. However, my following is not all. I have some more.

Using LIST on Twitter

We all fall for confirmation bias as human beings. We like opinions that amplify our own opinion. So we’d rather follow those who agree with us over those who challenge our thinking. Or even outrightly oppose us. I am no different but I find a balance.

Investment knowledge is a big topic for me and I have found a lot of brilliant people on Twitter on this topic. Following all of them would mean investing topic alone would take 90% of things that show up on my timeline. I consider that counterproductive and maybe even self indoctrination. So I only followed a few and created a list for every other that I found fascinating. Fascinating here doesn’t have to be that I agree with them nor they with me. Rather, it means a command of knowledge at what they do. Such LISTs (I have many of them) have helped me to maintain a diverse and more intelligent timeline.

If I’d allowed a 90% investment content on my timeline, I’d be given to 24/7 confirmation bias. Thinking that’s the only world that exists.

That’s not all about how I use LIST. I also use it for my research. The most recent list I created was done because I found a new love. After listening to Josh Wolfe conversations on a couple of Podcasts, I became fascinated by the subject of human progress. Such fascination is of course why I shared a tweet like this:

https://twitter.com/DavidAlade__/status/1352400810081202180?s=19

To sustain my interest and have an easy frame of reference, I started building a new list called “past and future”. Past and future is a list that has strictly people who are studying and sharing their ideas on how we got here (past). And people who are building technologies that could shape the future or those investing in it. It’s been an interesting list so far.

A lot of these lists are private so you can’t find them. LISTs are incredibly powerful. Those are just two ways I’ve unlocked their power that I thought I should share with you. I definitely have more.

But you see, while some are seeing Twitter just as another social media, I’ve simply used it in ways that you might not have thought off.

DMs

I keep my DM open so that I won’t have to follow anyone before they can send me DM. More importantly though so as to allow for serendipity. I believe at this stage of my Twitter life, locking my DM will be an obvious absurdity. A time may come (though I don’t see it happening) when I will lock it. For now, it’s forever opened so send me all those opportunities and send me the questions.

DM is an important feature of Twitter that unlocks opportunities. Closing it is just equal to closing the room to those opportunities as well.

Of course, this is about me. Remember it’s how I use Twitter not how you should use Twitter. I am not on the platform just to play away time. I’m on it to become a better person and for opportunities to locate me easily.

Read the second part – How I Use Twitter – Beyond The Surface

7 Attitude That’s Keeping You Poor

January 29, 2021 / Kasali Sakiru

If you ask anybody, both the young and old whether they like to be rich, you will likely have all yes as an answer. But if you continue to ask how and when they want it, the majority will not be able to answer precisely. Riches like every other good thing in life has ways to attract and retain them. As we all know that anything that we can attract can also be dispelled. There are so many ways people refuse to be rich unknowingly, even though we all claim wanting to be rich.

The following are seven ways in which you might have been chasing riches from your abode.

Sense Of Entitlement

One of the major reasons why some people are poor in this part of the world is that they often rely on their relatives for success. Coming from a wealthy family can make someone rich faster and it helps to have family members that can provide you with some initial capital. But when you rely so much on them and the help is not forthcoming you might find it difficult to be rich. I must add that people are entitled to their own money and deserve to spend it as they wish.

When one has it at the back of his/her mind that his relative owes him/her nothing, he/she will be prepared and ready to face the hurdle in the race of getting rich. You will be ready for the hard and smart works that are involved in getting rich.

Poverty Mindset

Everything starts from the mind. The Bible says as a man thinks so is he. For you to be rich you must have the right mindset, good attitude. One must know that money is not the root of evil but the love of it. Money solves problems and creates comforts, the more money you have, the more the problems you can solve.

You need money to live a fulfilled life and to help others. And you have to have the money first, even to propagate religion you need money. Money answereth all things, money makes the world revolve, there is no pride in poverty, and money begets respect and fame.

Fear Of Failure And Risk

A lot of people are poor today because of their inability to take risks. Those who are rich are risk-takers. Rich people are known for their bravery and optimism. Many people failed to do what is required of them to change their misfortune and thereby remain poor. No risk no gain they say, whether its education, business, project the process remain the same: risk-taking.

Failure is the hallmark of success, without failure, there would be no great success – David W, Anderson.

Failure helps us understand ourselves, identify our strength and weakness. Rich people have some moments of failure but also have a great record of success to show for it. Show me a man that hasn’t failed, I will show you a man that hasn’t tried anything.

Laziness

Money is a way to exchange value. And values are created through hard and smart work. There is nothing like overnight success or shortcut.

Whoever wants to be rich must be ready for brave thinking and hard work. The fastest way to earn money is by solving people’s problems and creating value not by looking for money itself.

When one spends another earns, so focus on creating value, then money will flow in. If you don’t lose sleep for money, you will lose sleep because of money. Whether legit or not, acquiring money always involves hard and smart work. Whoever is not ready to work very hard and smart is not ready to be rich, simply.

Greed/Stingy

Rich people are known for their generosity. They are people that always want to help people, raise and make life comfortable for people.

They rise by lifting people. They are never afraid of poverty. They get more by spending and helping others. From Bill Gates to Mark Zuckerberg to our own Aliko Dangote, Tony Elumelu e.t.c. are the highest donors to various foundations, some of them even have their foundation.

They are frugal but not stingy. They are not afraid that people will finish their money. Whoever has this attitude can never grow his business; they are frugal in their business and lifestyle but always hungry for more success to do more for people and society at large.

They know that money is exchanged for value, so they create more value to get more money. They don’t engage in a quick-money-scheme, they don’t believe in the game of luck.

Attitude Towards Rich People

One will wonder whether there is someone that will refuse to be rich. One will refuse to be rich when one refuses to do what’s required of him to do to be rich.

When you have rich people and despise their habits, then you are refusing to be rich. Money comes to those who love it.

You can’t increase in what you distaste –Pastor Ashimolowo.

Pastor Sam Adeyemi said he became rich when he started liking those who are already rich, unlike when he saw them as fraud or immoral people.

Remember you tap light from the light. When you disgust those already rich, then you may find it difficult to find your riches.

Living Beyond Your Means

One of the fastest ways to be rich is to live below. One of the major reasons people are poor today is that they live above their means, not even within.

As much as it’s good to live a good life or enjoy life, we should be careful not to do this at the detriment of our future or investment. Rich people are known for living below their means, this allows them to invest more and hereby increase their net worth. The keyword here is a delay of gratification, delay today enjoyment for future gain.

Rich people are known for saving and investing attitude while poor people always want to immediately enjoy and thereby sacrifice the future enjoyment and continue to wallop in abject poverty.

Rich people always spend below what they earned, they always do whatever it takes to earn more and live below means.

Bring It All Together

People get rich by following certain steps, certain attitudes and lifestyles to create value and thereby attract wealth. I’ve highlighted 7 of those things for you.

Which of these do you think you have that is hindering your progress?

Which of one these do you want to drop today? Put your comment below to share your thought on this.

Are You An Investor Or A Gambler? The Story Of Isaac Newton

January 29, 2021 / Onyekachi Anyanwu

“I can calculate the motions of the heavenly bodies, but not the madness of the people.” – Isaac Newton.

If you are an investor without a strategy you are probably a gambler living in denial. Even the greats suffer losses, in the game of investment, a loss is inevitable. Strategy is king, perfect information, if it exists, is the difference between gains and losses. Investment can sometimes be the winner takes all.

If you have never heard of Isaac Newton (I am assuming you had basic high school education), it could be that you were half awake through your science classes or you have been under a rock for the past 500 years. I doubt the latter but the former is quite believable. Isaac Newton is probably one of the greatest analytical minds that have ever existed, his postulations and theories redefined science and formed the core of modern physics.

For someone with a keen eye for numbers and complex calculations, who would have thought he would be reckless with his investment decisions. Newton was no ordinary investor, he was the greatest mind of his time, how could he make what I term a “novice mistake”? News flash, he sure did. Man’s folly is not modern.

Isaac Newton experienced great losses in the stock market crash of the 1720s, today’s equivalent of millions of dollars in losses. To be candid, the market has no respect for anyone, absolutely no one, not even a man whose contemporaries regard as the greatest mind of his era.

Newton’s story was told by Thomas Levinson in his upcoming release “Money for Nothing”. According to Levinson, Newton in every regard was a cautious investor. Newton had a considerable amount of shares in South Sea Company- a mercantile firm whose trade interest span goods and slaves. His holdings were estimated to be worth around £13,000, today’s equivalent of £2 million.

South Sea Company backed by a well bribed British Parliament devised a scheme to convert debt holdings to equities. This was a scheme developed to prop up the value of their share price- financial gymnastics is not new. From a modest £100 a share in Jan 1720- Newton bought his shares at this price, to £325 per share by April, by May, SSC shares were trading as high as £487 per share. In Levinson’s words, “the boom delivered seemingly limitless wealth”. Are we sure the year 2020 is not 1720 in disguise?

Newton at first resisted the urge to sell, holding on to his shares. Like most investors, he finally gave in and sold his holdings for prices ranging from £400 to £500 per share. He pocketed a good sum in return, estimated to be about £20,000, a 200 year equivalent of his annual salary. As Newton was selling his shareholdings, so also was the price of SSC shares rising- market forces were driving the price, as demand was on the rise. By June, SSC shares were trading as high as £770 per share. Should Newton have waited?

Newton, like most investors, will be licking their wounds for selling too soon. Why did I sell it so soon? Will be a constant theme in his thoughts. He decided he wanted back in the game. By August, he started by buying SSC shares paying as high as £700 to £1,000 per share. Remember he bought first at £100 per share, sold at £400 to £500, netting a profit of £300 to £400 per share. Now he is buying back at £700 to £1000.

Would this decision come back to bite him? It definitely did. From a high of £700 to £1000 per share, by October 1st, SSC shares were trading at a low of £290- this decline wiped out the entire gain since the upward trajectory started. By November, it was trading for £200. Newton losses were catastrophic. He lost an equivalent of £20,000, if not even more.

If Newton, the greatest thinker of his era could make a catastrophic mistake, who says you and me are not susceptible. In Levinson’s words, “Newton had a simple explanation for his lapse. At the crucial moment, he’d lost his mind. Or rather, others around him had lost theirs”. Money can make you lose your mind you know.

The market has no place for emotionalism. The thrill of the moment got to Newton, I believe, or how best can you explain away how a man who made a profit initially from buying low and selling high, to wanting back and finally losing all. First, he must be an investor without a strategy or he was just overly greedy or maybe both were at work. If this had happened to a Nigerian man, we can point to his “village people”.

Newton’s mistake is still happening, more so at an alarming rate. 300 years have passed and investors’ behaviours haven’t changed a bit. Sophisticated finance models possessing predictive capacity never seen before are employed nowadays but the trend remains the same. Let’s hope 2020 isn’t reminiscent of the 2008 market crashes.

Are we gamblers or investors? Gamblers often tend towards what economist call the “gambler’s fallacy”. According to Investopedia: “Gambler’s Fallacy occurs when an individual erroneously believes that a certain random event is less likely or more likely, given a previous event or a series of events”

Flipping a coin 5 times and a head appears 5 times doesn’t mean at the sixth time a head or tail will appear. Each event is independent of the previous event. To make a decision based on previous outcomes for truly independent events is folly. The stock market is a perfect example.

This is where the complexity of investment lies, there are no rules cast in stone. We must understand that the market is cyclical: boom, bubble and burst. Understand market timing and always have a playbook.

Harry Markopolos, the acclaimed whistleblower of the Madoff scandal, once opined that any investment vehicle that can’t be explained in simple terms is probably not worth your time and money.

Nobel physicist Albert Einstein famously said; “God does not place dice”. If you would permit me to add a caveat, but humans do.

Strategy is king
Information is key
Hype is a red flag
Timing is important

Biased Towards Monopoly

January 29, 2021 / David Alade

Winners-take-all is the language of the internet. In fact, it is often what serves the common good.

Google is the dominant search engine and Facebook serves more than 2 billion people to become an advertisement behemoth. As it is happening in the world of corporations, so is it happening in the world of creators. The top 1.5% on Spotify pull 90% of royalties, top 10 writers on Substack make $7m. The more you check the creator economy and the technology corporations, the more you see similar divides. A situation where the top 1% make approximately more than the bottom percentages.

I conclude after observing this narrative that this is a feature of the internet and not a bug. Since network effect is what drives a lot of the successes, plus the mimetic desire in humans, it’s only expected that such a pattern emerges.

Network effect means a system/phenomenon becomes more valuable with every additional user to the network. I will benefit more from WhatsApp if everyone that I know uses it. So will others who use it and the network will grow thereby to emerge as the winner that will take all. In the world of individual creators, this happens when a creation gains more approval based on the fact that it has gotten a lot reviews and say feedbacks.

Mimetic desire means we desire a thing once we realize that our neighbour has it or is demanding it as well. It’s the reason why social proof will help you sell more products/services than the service/product’s feature itself.

This is the way of the internet and it’s the reality that the creator in the gig economy must be made quickly aware of.

The internet is biased towards monopoly. It always optimizes for a winner-take-all. That’s not a bug though, but a feature of the internet. The way it makes up for that inherent ”weakness” is to give room for originality. The analogue world rewards conformity instead.

The Internet allows for originality

Li Jin said in a tweet, “all the things I loved doing while growing up that were dismissed as “wasting time” are now activities that have value.” When we were kids when there are a finite number of things that you can do to bring you money (representation of value). Today, almost anything imaginable that you can do and publish on the internet can bring you money. Times have changed and the demand problem that used to devalue those activities have been solved.

https://twitter.com/ljin18/status/1352131482932928512?s=20

The reason why those activities don’t have value then is that there is no demand for them. Anything that you can do that commands demand is a thing of value. Demand means someone is willing and able to pay for it.

Pre-internet, conformity is necessary because society has exhausted the threshold of craft possible. So you cannot produce a skit and expect to make a living from it. Even if you can, you may be discouraged because it’s not “noble”. Skits are even more feasible, playing video games used to be a time-wasting activity for example, but not anymore. As it stands now, there are a lot of video games streaming services that can help you turn your passion into a money generating activity. The number of things that you do to earn money now is a lot, since global demand has been unlocked. Anything now can be of value. How is this relevant?

This phenomenon implies that you can now be yourself without the need for conformity. You can do this and still give value to the world. As I noted in the thread referenced below, “In an ideal world of the internet, when you distribute anything, it is supposed to reach the current 4.5 billion people on the internet. Once it reaches them, you should get the ‘45,000’ people that will be able to connect with you and what you’ve created. Your audience is that ‘45,000’ spread across the world.” But pre-internet, there was no way your uniqueness could connect with those 45,000 people spread across geographies, hence, the need to confirm.

https://twitter.com/DavidAlade__/status/1234223798670561280?s=20

So the way the internet works now is that it doesn’t reward duplicity so much, you cannot be another Joe Rogan, there can only be one, and that one has been abundantly rewarded. You cannot be another Naval. The more of yourself that you bring on the internet, the more unique you become on the internet and the greater your reward. Those who mimic get lost in the crowd.

Does that mean everyone can become the top 1%?

The simple answer is no. What you become from your craft will be a function of your uniqueness, relatable audience and tenacity. To be mathematical completely, I will add a “plus an error term (sometimes called luck).”

You see, even though what the internet reward is your uniqueness, which makes it hand over a monopoly to you, all monopolies are not the same. Some can bring you $100,000 a year and others may only give you $10,000 a year. Yet, as we’ve learned, a $1m a year is not impossible.

An honest question: what do you need to lead a comfortable and stress-free life? Maybe not an amount of that will bring you to the %. What some people need is some 1,000 true fans while 100 true fans will do for others.

The concept of true fans is to highlight to creators that to be successful, you don’t need millions of customers or millions of clients. You only need some true fans who believe in you and would pay for your services. The “1,000” concept is saying all you need is 1,000 true fans that would pay you $100/year. While “100” concept proposes to look for 100 true fans that would pay you $1,000/year. In both scenarios, the idea is that $100k per year is big enough a reward for any creator online. This number would anyone to the middle class in the richest countries comfortably. Of course, the numbers are only hypothetical and you can work out what is good for yourself. But to get those true fans, you will need to act in a way that will get you abundantly rewarded which is bringing your unique self into your creation.

The search for the true fans

Time Urban wrote a thread a month ago on how the interplay between what you create and how they translate to fans.

Here’s how he described it:

If you create art/content—songs, YouTube videos, articles, podcasts—think about people who come across your work as 4 categories of reactions:

1) Didn’t like it

2) Thought it was solid/fine

3) Really liked it

4) Absolutely loved it

1s and 2s are gone forever. 3s might come back. 4s will subscribe and evangelize your work to everyone they know. 4s are what make your work take off, not 3s. A piece of work that yields 4s at a 20% vs 5% rate probably ends up with probably 10X (or 1,000X) the spread.

The thing is, content that yields a lot of 4s also usually yields a lot of 1s—more 1s is the cost of going for more 4s. Likewise, creators trying to minimize 1s also usually minimize 4s. So it’s really two choices: the 1-4 strategy or the 2-3 strategy. 1-4 beats 2-3!

I like his methodical description of how the creator economy works. Like I noted above, it relies on network effect and mimetic desire in humans. 4s are those who would compel mimetic tendencies. They are the initial true fans and the evangelists. And because they like your content or art, more people from other groups of the divide would find a reason to like it as well. Sure, not all will end up liking but enough for you to make your life comfortable and venture profitable.

And yes, to get them, you will have to choose an interplay between your various forms of content/art.

Largely, the internet is some beautiful tool that we have now. Never before have we had access to so large a pull of demand that each of can tap into with our originality. And never before has monetizing our originality been this easy.

So we are all individually left to maximize the advantage that is in our hands.

Money Is Whatever We Believe It To Be

January 28, 2021 / David Alade

As I study the history of money and how we got here I am lost in awe of how interesting the journey has been.

Yes, this is an article about the history of money that was not taught in class. It is relevant for our understanding of where we might be headed next.

In case you don’t know, money has not always been the note we carry around today. It has not always been fiat. We’ve moved from stones (yes that’s not a mistake) to seashells and from one form precious metal to another. It’s been a long journey down here and I want you to know that. I’m telling you this story not in any chronological order at all.

Rai Stones of the Yap Island

I picked Rai Stones first because it is one that most counters the idea of money as we know it today.

These stones were not native to Yap and we’re brought in from a neighbouring community of Palau or Guam. The beauty and rarity of the stones made them desirable and valuable to the Yapese. Procuring it was difficult because it involved a laborious process of quarrying and then shipping.

This feature of it, scarcity and the work required to get it made it become the way the Yapese transfer value among each other. That is, it’s their money.

And because of the size of the stone, they were usually placed in the public square. At the public square, the ownership of the stone is transferred through a public announcement. This was used for centuries if not millennia on the island until no more.

The Rai stone stopped being the way to exchange value when a business-minded man named O’Kafee flooded the island with different Rai Stones which he got for free and imported to the Yap Island. When scarcity is taken away from money, it stops being money.

Other forms of money

While the story of Yap Island is unique, historically, some other forms of money have also been used in the past.

Cows and Sheep – they were used around 9000BC as a unit or exchange. This was one of the first iterations of money after the era of a trade by barter. It was made possible because men started domesticating them and since they tend to share common characteristics.

Unlike trade by barter, you don’t have to locate someone else that needs your good. Cows can be easily exchanged. That’s it, and we had new money.

Seashells – they were widely used in Africa, Europe, and Asia. They are similar to today’s coin and might have also birthed the idea of coins that were later of bronze and copper.

Gold – this is still in use today but more as a store of value asset than as a currency.

Fiat – what we know as money. A dollar or Naira or Rupee bill. It’s been a journey to where we are now.

As you’ve seen from all these examples, money can be anything once society agrees that it is. Money of itself should not necessarily have any intrinsic value. Anything that we agreed upon to use as money becomes money. And it will interest you to know that you can have your form of money as long as someone else is willing and ready to accept from you what you have to offer in exchange for the value they will provide.

On a societal level though, for value exchange to be as frictionless as possible, a generally accepted form of money must emerge. That’s how we can all have a common language. And that’s why we are currently settled on USD and NGN and Rupee or anything your country might have agreed on.

When money is not scarce, it is no longer money

All through history, the reason why money has changed is that the former form of money stopped being scarce. Once it stops being scarce, it stops being a medium of exchange and won’t be able to store value. At that point, it definitely doesn’t matter again if it serves the unit of account function.

The reason why Rai stone stopped being money is that O’Kafee took away its scarcity from the island. He flooded the island with different Rai Stones and it crumbled.

Gold has been for ages and a lot more other innovation has come and gone. Yet, Gold remains today as something that can serve as money. Because people can’t easily make a lot of it.

Fiat on the other is just as scared as the government wants it to be now. And while it still serves as the mainstream money, its inherent flaw of infinite printability may become its fall.

Whatever may happen, the world will always find a way to move value across space and time.

Is It Too Late To Invest In Bitcoin

January 27, 2021 / David Alade

The straight answer is no, it’s not too late.

Let me share the contextual answer with you.

The first time I knew something existed that is called Bitcoin was in 2015. The person who introduced it to me asked a simple question: “If you transfer a file from one phone to another, which one is the original?” I was stunned by that question and it immediately clicked in my head how interesting that question was. Of course, to save the day, this person asked for my flash drive and sent me a lot of videos explaining how Bitcoin is relevant to that question. I watched the videos but didn’t fully understand things.

Fast forward to 2017 during the bull ride before the peak. Somehow, I found myself on this group where the message on the platform was that Bitcoin is now too expensive and no one should buy. The group admin and his men, of course, we’re pitching alternative coins then called SwissCoin. It was polished as the next Bitcoin that will rise from £0.2 to thousands of euros. In fact, the timeline of when that will happen was shown. Today, they are no were to be found.

Throughout this period of knowing about Bitcoin, I didn’t trade or invest in it at all. While the reasons may be a lot, the most crucial was that I didn’t have the money to invest. However, every year since I knew about Bitcoin, people have always wondered if it was the right time to invest in it or if it was too expensive already or if they could wait for another perfect time. And I mean every time.

Just to confirm that hypothesis, since you first heard about Bitcoin, how many times have you wondered if it was the right time to invest in it? And how many of those times have Bitcoin gone up more in price and you start imagining the kind of returns you could have made if you’d invested the previous time? A lot, right? I know.

I will share with you the simplest reason why I bought my first Bitcoin and which I’ve not sold until today.

Remember the question my friend asked me from above? “If you transfer a file from one phone to another, which one is the original?” Bitcoin is the technological breakthrough that solved that problem of infinite replicability. That is, you can successfully transfer the original version of Bitcoin over the internet. Beyond that though, Bitcoin was built with features that make it infinitely scarce. As you may know already, only 21 million units of it will ever exist.

Maybe that sounded interesting so far but that’s not my reason. Building on the problem it solves and how it is designed, two outcomes are possible for it. One it can fail utterly and not become anything. That will happen because society somehow agrees that they are okay with the status quo. Two, it succeeds massively and emerges to become the internet Gold. In which case, it’s value would be worth definitely more than what it is now at a less than $1T market capitalization.

Yes, that was the first understanding that I had that convinced me to invest in it. I chose to believe that society would see value in Bitcoin and choose it above others. I’m a technology optimist and my optimism is well-grounded, any bet against technology is a costly bet. The pages of history are full of proof.

So I chose the other side of the argument and put my money where my mouth is. That said, what’s even more important here is for you to know that so far, I have less than 5% of my investment in it. I am allocating just enough so that if I’m wrong, losing the capital won’t set me back and if my optimism is supported by the society, the return will be mouth-watering.

You are asking yourself the same question you’ve asked in the last 1 or more years. You wonder if you should still invest. I’m saying why not be like me and have optimism in technology and human ingenuity for efficiency. Beyond that, why not allocate just enough to get exposure to it but that won’t tamper with your survival if our optimism is unfounded.

Please note that Bitcoin is volatile a lot in the short term. However, if you look back at where it is coming from and where your optimism and mine and that of the society at large can carry it, you may just be surprised at how irrelevant that volatility may be.

WILKES-BARRE, UNITED STATES - 2020/11/27: A man wearing a face masks leaves Game Stop with the new Play Station 5 gaming console on Black Friday. (Photo by Aimee Dilger/SOPA Images/LightRocket via Getty Images)

GameStop! Same Lesson, The Future Is Unpredictable

January 26, 2021 / David Alade

When an unknown stock out of nowhere makes all the major headlines and takes over FinTwit, you will do well to pay attention to the story of what may be going on.

GameStop qualified for that description this week. Ordinarily, I don’t do so much as follow individual companies except they are interesting to me. So when GameStop started appearing here and there on my timeline, my default mode was to switch off my attention signal to it. But it persisted and I could not help but catch-up on the story. It’s a wild one and the most important lesson for me is that we can’t predict the future and the best we can do is to keep an optimistic view of it because humans will always find a way to progress.

So what’s the story?

A group of people on Reddit under the subreddit r/WallStreetBets (2.6 million members) saw that a stock has been shorted way too much. In fact, it would conveniently make the list of one of the most shorted stocks in history. Seeing that, they decided to organize one of the most popular if not the most popular games in the market. They started buying the stock. The result of buying the stock is that demand on the stock starts to rise. And as we learned from basic economics, when demand for a particular product/service starts to rise beyond the available supply, the price would naturally go up. That’s basic economics.

Shorting stocks means borrowing a stock today and selling it with the expectation that the price will fall further in the future. If it happens that things go as planned and the price falls further, the investor who borrowed earlier will simply buy the stock back at a lower price and return the borrowed shares. On the other hand, if instead of the price going up, the price starts going down, the investor who had earlier borrowed the stock will have to buy back the stock at a higher price in order to limit their loss.

Short Call Option Strategy Explained | The Options Bro

That is, you borrowed it at $10/share and now the price is rising instead of falling, let’s say it’s now at $15/share. The investor quickly buys the shares at 15 so he can return to limit their liability. This process of quickly buying back to forestall liability is called short squeezing. The problem with this process though is that the more the investors demand the stock, the higher the price of the stock would go. They end up in a trap and the liability can be unlimited.

So as Redditors started buying GameStop, this happened and the hedge fund investors started losing money on an unprecedented level.

That’s story

What are the lessons?

No doubt, the coordinated effort is now successful. Let’s talk about ramifications.

Like I mentioned earlier, the most important lesson for me is that the future is unpredictable. If you think you could have seen what’s happening to GameStop coming and you could have benefited from it, you are still far away from understanding the workings of the world. Sure, if you were a member of the community that masterminded this, you would have gotten information and maybe benefited. Alas, you are probably not. The benefit of hindsight can be misleading many times.

If the future is unpredictable, what can we all do then? Betting on a future of prosperity is the most reasonable thing to do. Yes, you just need to be guided on how you place your bet. The world rose from abject poverty to abundance that it is today based on human ingenuity, I am not ready to write off that ingenuity today. It is such ingenuity that caused the hedge funds to lose billions of dollars today, albeit a market manipulation scheme. It is easier to win if you bet on prosperity than betting on failure.

How to bet on prosperity is to identify a company at the edge of innovation and scientific breakthrough and put your stake with them or otherwise, bet on the sum total of all human effort represented by the total stock market index. If these hedge funds had not tried to predict the future and bet on woe, this wouldn’t have happened. The butterfly flapping its wing did not set a good condition in this case for some. We could argue it did for those who masterminded the scenario.

Some other lessons:

Don’t ever short a stock

The future is unknown and optimism is more rewarding. Neutral is better than shorting, even if you are convinced of an impending end. If you think you are very convinced that the stock will go one way, ask the hedge fund guys where their conviction brought them. If you think it cannot happen to you, you have not read enough articles on this blog, “risk always looks impossible until it happens” is an intrusive statement.

Believe rather in prosperity and invest accordingly.

Retail Investors have become more power

Throughout last year, comments were flying here and there about how Robinhood traders who don’t understand the market are pumping share price up. Some professional investors would probably have wished such access wasn’t made available. Unfortunately, it is available and can’t be taken away again. And the retail traders have demonstrated in the past 14 months that they have enormous power over the market just as much as the big guys could have. Always put that into consideration going forward.

This is not the end, legal possibilities

Market manipulations are illegal in the market, and this is a whole new dimension to it. So expect the men of the law to step in at a point in time. We will have some new guidance.

Did you wish you had participated on the GameStop ride at least to benefit a little? In this other article, I explained a methodical approach you can take to doing that.

Can’t Stay On Budget? Do This 5 Things

January 25, 2021 / David Alade

A conversation came up in a group that I belonged to recently and a few people spoke out jokingly that they are unable to resist the temptation to spend as long as they have the money. I recognized the joke in that but at the same time, I know that a lot of people may be battling with financial indiscipline in the area of spending. As with any other phenomenon, I turned to my own financial life to pick a couple of lessons on how I have managed to stay disciplined.

From my youthful age, I’ve always been prudent with money. While that is good for me as an individual, it’s sort of not so great for me as an educator that I am now. Meaning, I’ve not had to fight and battle some tendencies that my readers may have. Notwithstanding, I’ve listened to a lot of your stories and advised a lot of you. So to some extent, I share your struggles.

So if you are the type that always finds it hard to stay on budget, the 5 guides below would be your saving grace. They’ve worked for me and others and I know it will work for you as well.

Different accounts for different purposes

This principle has been amazingly helpful to me. Once I get paid, the first thing that I do is to transfer the money to different banks for different purposes. The first goes to a bank that I use to operate my monthly expenses, the other goes to my savings and I leave just a paltry in my salary account for a rainy day. Usually, a rainy day comes when I’ve almost exhausted my monthly expenses and need something as a cushion before the next pay comes in.

The number one benefit of this strategy is that I quickly lose the illusion of having a lot of money in my account. An illusion that triggers the “spend spend” hormone in you and I. In just a wink of an eye, I have lost the enthusiasm of a payday and back to the mood of “you’ve got to be prudent with what’s left”. I found that if I don’t do this, I tend to spend more than necessary.

And you know what, there’s one month in the year that I allow myself to let go of this rule. And it is that month that I spend the most in the 12 months of the year. That’s December. I tend to spend more in that month but it’s by design.

I save more than I should then give a mid-month allowance

As I mentioned above, I tend to leave some amount of money in my salary account that I often need to fall back on as the month runs to a close.

That happens because I usually save more than I should. I don’t give myself a generous budget. It’s another strategy that I’ve employed over the years. It has helped me to be financially disciplined enough for my expense not to rise in tandem with my income.

Of course, I don’t want to suffer myself on the back of saving for the future, lol. So if I need money mid-month I tend to pay myself more.

Huge projects expense come from a different account

Whenever I want to make huge purchases, the money doesn’t come from my expense account. Remember that the account is always too lean to be able to accommodate such expenses. So what I do is to withdraw the money from another account where I send all my money before they are either invested or used for huge purchases as the case may be.

The benefit of this is also to foster financial prudence. I know that every purchase of this nature is reducing my investable capital. And being someone that likes to invest money, it usually takes a lot before I can agree to make such purchases. When I say “take a lot”, I mean I take my time to consider it well and be rest assured that indeed the item/material is deserving.

I delay almost every purchases

…and whenever I make the purchases, I always go for the quality.

This point is related to the one above. I don’t make huge purchases the moment I perceive I need them. The nature of huge purchases is usually that we can delay them for as long as we want and it won’t significantly affect our survival. So I tend to delay it more.

Something my Mama taught me is that if I am going to buy something, I could just as well buy the quality ones that will last longer. What’s the point of buying something that you need and you are buying a lower quality and that will soon need a replacement again? This is especially so if you can afford the quality one.

The process of delaying of course allows me to do research, weigh my options, stops me from being in haste and helps me to make an optimal decision. You should try it as well. Delay that purchase.

Don’t be an impulsive spender

Still related to the point above but I believe it needs a class of its own.

Fundamentally, I am freaked with materials. But I’ve never been impulsive enough to buy them on spot. Controlling my impulse is the key. Except you do so, of course, you won’t have discipline you so much needed.

3 Core Principles To Guide Your Investment Decisions

January 24, 2021 / David Alade

If you are conversant with this blog you would have learnt that I like simple things. I like my investment process to be as simple as possible, I like writing to be as simple as possible and I like to do things that will allow me to have a night sleep. The downside to my simple lifestyle is that I may not make the highest return in the market but I can be sure that my capital can stand the storm and that over a long enough time, I will outperform more than 80% those who complicate investment decisions.

Don’t get me wrong, doing simple things has ramifications. It could be buying a low-cost Index ETF over and over again, it could be buying a specialized ETF or it could be a combination of both mentioned already. And yes, it could also be doing the hard work to find the next Amazon or Apple and averaging in on them for the next 20 – 40 years of my working career. The idea is that keeping one’s investment process as simple as possible has dividends that surpass the alternative.

To further my agenda of helping you get wealthy through the practice of investing, I want to share with you 3 core principles that should guide all your investment decisions. These are principles that will serve as a light for you every time you want to put money into something and when you want to get it out.

Don’t lose

Whenever the issue of money comes up, our first instinct is always how do I make more of it. How do I double this amount of money in this short period? As Tony Robbins put it in his book, the best investors are obsessed with avoiding losses because they understand a simple but profound fact: the more money you lose, the harder it is to get back to where you started.

Let me put that statement in perspective for you. If you invest N100,000 and lose 50% of it, bringing your capital to N50,000, how much would you need to get back to N100,000? You may be tempted to say all you need is to make the 50% that you lose back. However, you would be wrong because turning N50,000 to N100,000 requires a 100% return. And 100% is an unprecedented number that may take up to 10 years depending on what you invested your money in.

This explains why Warren Buffett 2 rules of investing are, one, never lose your money and two, never forget rule number 1. The rules are instructive enough.

Never lose your money doesn’t however mean you should not invest your money at all or that you should avoid making more money in the name of not wanting to lose money. You would be wrong to think that way because even the Buffett himself is a legendary investor. So what does it mean to not lose money?

Don’t invest in what you do not understand. Doing so would ordinarily force you to make investment decisions that will cost you money.
Don’t risk too much of your capital.
Define your investment strategy and stick with it
Don’t chase the highest return in the market rather invest in what will give you a great sleep at night.
Aim for being reasonable over being rational. Humans are emotional and we can’t be rational all the time but we can be reasonable all the time. That’s why I wrote this article on how to deal with the fear of missing out.

That’s not all but I’m sure those would give general guidance about things you can do to lose your money. High returns are good, doubling your money is fun. However, not losing what you’ve worked hard to earn is even more rewarding and it’s a lofty aspiration and easily attainable goal.

Asymmetric risk/reward

While I was learning corporate finance, what I was taught was that the higher the risk the higher the expected returns. In order words, I should not expect higher returns except I’ve assumed a higher risk. And I think there is an element of truth in that no doubt. Yet, one of the best things you can do for your investment is to look for opportunities where the reward is really high relative to the risk you are taking. It’s called asymmetric risk/reward.

Let’s use numbers a bit. Imagine you have N1m to invest and you take 10% of that (N100k) to invest in an asset that returns 500%. That is to say, your N100k investment is now worth N600k. Even if you only made a moderate 10% on the remaining N900k, your new net worth at the end of such period would have become N1,590k N(900k + 90k + 600k). On average, your investment had made a return of 59% on your invested capital.

The temptation when one finds an asymmetric investment is to want to bet more than what is reasonable and prudent. Remembering the first guiding principle should be a guide here. Asymmetry investments are not definite, just as much as they can increase greatly, they can also reduce erratically. That’s why putting a moderate amount of money is always the optimal hedge. Thinking about our example from above, if you lose 50% of the N100k, overall, your portfolio will still stand strong because your total balance at the end of this scenario would now be N1,040k N(900k + 90k + 50k). In which case you would have been true to the first principle of not losing your money.

And asymmetry investments are always available even though it is only the benefit of hindsight that makes them obvious. To mention a few, Apple, Microsoft, Tesla, Bitcoin, Starbucks are a few that will qualify for an asymmetry bet. The relevant question as you will agree with me is which investments are the next asymmetry bet? Well, they are always known absolutely until it’s too late. Keep an eye out is my response to that.

Are asymmetry opportunities only available in the public market? The answer is no. Some get their asymmetry returns from private investments like investing in startups, some times, it could be just a friend introducing you to something from nowhere but which you feel confident enough to invest in. It can come from anywhere.

Diversification

The third one is obvious. We’ve all heard the statement “don’t put all your eggs in one basket”. But what does that mean? There’s a difference between blindly quoting a statement and knowing what it means plus doing it.

I learnt something interesting from Tony Robbins on the different kinds of diversification. I will share them with you because they are important.

There are 4 ways to diversify effectively:

Diversify between assets within different classes (e.g., real estate, stocks, bonds, commodities, private equity)
Diversify your holdings within asset classes (avoid concentrating putting all of your money into one stock or bond; you must diversify even within your asset classes)
Diversify globally (e.g., markets, countries, currencies) – if you live in my part of the world where the currency depreciates very often, this point is even more important for you. Having some of your investment in a dollar-denominated asset, some Bitcoin, if you believe in it, would be a practical way of going about this.
Diversify timelines (e.g., dollar-cost averaging, maturity date) – you are never going to know the right time to buy anything. But if you keep adding to your investment systematically over months and years (that is cost averaging), you’ll reduce your risk and increase your return over time.

All the principles mentioned so far are easy to repeat and read but doing them can be difficult. That’s the nature of simple things, they are difficult to implement but those who implement painstakingly are always rewarded. That’s why I like the wisdom of Charlie Munger when he said: “take a simple idea and take it seriously”. Doing so will put you in the top 10% of the world’s best I believe.

7 Things I Constantly Remind Myself Of

January 23, 2021 / David Alade

Real happiness comes from the journey, not the arrival

And upon arrival, what brings the most laughter are the reflections on the journey. So I can just as well enjoy the journey and make the most of it while I’m on it.

Don’t be a donkey

Many are the wishes and dreams of humans but he is not allowed to do all those things. Focusing on one thing per time has a way of abundantly rewarding him.

Don’t stop when you have failed

I actually call that “not stopping“. It’s a simple idea that even when what you’ve planned on doesn’t work, and you have failed on your schedule, don’t stop at making other attempts.

You planned to write every Thursday of the week in a month and you missed your second schedule. Don’t stop, just write on the following day. The act is more important than when the act is done. The world will reward you for doing before it considers when you do it.

It’s my responsibility

Yes, “many are the thoughts in the heart of a man but it is the will of God that will prevail”. Still, I remind myself that my life is my responsibility and it will become whatever I make out of it. If you like, believe something else like some forces beyond you is pushing you. The result of such life is that you don’t get past some level in life.

Taking responsibility for one’s life is a super power.

I don’t know what tomorrow holds

And it doesn’t matter how much I may try to predict tomorrow, it will always come with surprises. What I can do at best is to expose myself to more surprises so that I may have options.

Having the option to choose among different surprises is the only advantage I or you will ever have.

I can only be me

I will surely have a lot of things to admire in you and others. However, if I make any attempt to be like any or everyone else, I’d end up with a miserable life. Our conditions are different and so are our journeys.

Given enough time, things even out

If you are driven today with the fear of what people will say, you will learn that they are either not saying anything at all or they won’t say it for more than some time. With time, everyone moves on and I am the one to live with the consequences of my decisions. I can as well just never consider what people will say in my decision and just focus on regret minimization and happiness maximization.