Two things before we start:
Let’s get to it!
Trading in the Zone helped me reframe my thinking in terms of probabilities (life is a lot like poker) when I was first starting out, and I have since revisited it several times. It deals mostly with stock trading, but the concepts have more to do with managing oneself and thus equally apply to the world of crypto.
“Trading doesn’t just reveal your character,” Douglas says, “it also builds it if you stay in the game long enough.” His lessons helped me identify many of my own mental biases, better manage my emotions, and ultimately led to more confidence in trading highly volatile crypto markets.
“A probabilistic mind-set pertaining to trading consists of five fundamental truths: 1. Anything can happen. 2. You don’t need to know what is going to happen next in order to make money. 3. There is a random distribution between wins and losses for any given set of variables that define an edge. 4. An edge is nothing more than an indication of a higher probability of one thing happening over another. 5. Every moment in the market is unique.” — Mark Douglas
(Shout out to Chris Dunn — thanks for the recommendation!)
Jim Paul was raised in a small town in Northern Kentucky and eventually moved to become governor of the Chicago Mercantile Exchange. His story is a rollercoaster ride of success and failure. At the pinnacle of his trading career he blew $1.6 million, not just $1 million… in one trade.
He paints a cautionary tale of hubris and getting caught up in our own thoughts, disregarding clear warning signs and what happens when we get too greedy (sound familiar?).
While he was focusing on commodities, the lessons apply across any financial asset and where high-stakes decisions are being made. I read it before the crypto bubble burst (and before I lost a lot of money) so it’s taken on new meaning for me in the past year, as it might for you.
“When I was a kid, my father told me there are two kinds of people in the world: smart people and wise people. Smart people learn from their mistakes and wise people learn from somebody else’s mistakes.” — Jim Paul
Thinking, Fast and Slow is a seminal book in behavioral economics and has been revolutionary in identifying our cognitive biases. It’s had repercussions for how we think about practically every industry in the world.
Say you’re at the zoo and you see a jaguar within a glass enclosure. The jaguar takes a swipe at you. The primitive part of you brain reacts with fear and flight. It’s only later that the more evolved part of your brain introduces logic: “there’s a sheet of glass between myself and the predator. I’m safe. A fear reaction is not indicated”. From the brain’s perspective, these sorts of “false positives” favor natural selection. From an evolutionary perspective, we are primed to react on the basis of emotion; it takes a real, concerted effort to develop mental and emotional fortitude. Kahneman admits that simply “knowing” about our psychological fallacies is not enough to prevent them. The best we can do, then, is to setup systems that will lower the chances that we make stupid decisions.
All of this applies directly to how you trade and invest. Concepts that fascinated me: the peak end rule, regression to the mean, priming effects, anchoring, saliency — being aware of these and how they operate are the firsts steps to protect yourself against your own (potentially) self-destructive instincts.
“Risk” does not exist “out there,” independent of our minds and culture, waiting to be measured. Human beings have invented the concept of “risk” to help them understand and cope with the dangers and uncertainties of life. Although these dangers are real, there is no such thing as “real risk” or “objective risk.” — Daniel Kahneman
Ego is the Enemy is packed full of historical anecdotes, Stoic philosophy and life lessons that make it both fun to read and practical. Ryan Holiday says that it’s common to be self-destructive and successful in a greedy way, but it’s much harder to be self-aware of our own actions and the impact it has on those around us. The main culprit, of course, is our ego. Our desire to win, our desire for fame, status, and power.
From Persian King Xerxes to Steve Jobs, there are plenty of examples that illustrate the dangers of ego run amuck; in some cases the protagonists emerge victorious after realizing their wrongdoings, in other situations they dig their own grave. Each chapter provides a good antidote for those who feel like they’re on their high horse and need to be brought down to earth, and equally for those who are paralyzed to the point of inaction by their own self-criticism and fear.
“A true student is like a sponge. Absorbing what goes on around him, filtering it, latching on to what he can hold. A student is self-critical and self-motivated, always trying to improve his understanding so that he can move on to the next topic, the next challenge. A real student is also his own teacher and his own critic. There is no room for ego there.” — Ryan Holiday
Annie Duke graduated university with plans to become a psychologist, but after her brother invited her for a poker night, she fell in love with the game and went on to become a World Series Poker champion. She draws on examples from business, sports, politics, and of course poker to share tools anyone can use to embrace uncertainty and make better decisions. Annie makes the point that our life is not like chess — we don’t have all of the pieces in front of us.
An important less from the book: Traders who set financial goals almost always lose. Why? Because you can’t control the market. People try and force their will on the market to no avail (I want the market to go up in price so it benefits ME), resulting in emotional decision-making, like panic-selling when the market plummets. Instead of trying to make the market fit your financial goals, the wiser choice is to create systems that allow you to make higher-probability winning trades. It could be as simple as setting a stop-loss, or always writing down your trades before executing.
“Poker, in contrast, is a game of incomplete information. It is a game of decision-making under conditions of uncertainty over time. (Not coincidentally, that is close to the definition of game theory.) Valuable information remains hidden. There is also an element of luck in any outcome. You could make the best possible decision at every point and still lose the hand, because you don’t know what new cards will be dealt and revealed. Once the game is finished and you try to learn from the results, separating the quality of your decisions from the influence of luck is difficult.”
It’s pretty hard to build a good habit, like doing 100 pushups a day, eating a healthy amount of broccoli, or listening before you speak. Once temptation comes calling, it’s easy to slip back into bad habits, like stuffing my mouth with hazelnut chocolate or not shutting up when I should.
The fascinating part is that the mechanism for habit building is the same, whether good or bad. I never really understood this until I read this book, and it helped de-mystify a lot about my own behavior. For anybody looking for a practical guide to break bad habits, and build new ones — this is it.
“The Habit Loop: This process within our brains is a three-step loop. First, there is a cue, a trigger that tells your brain to go into automatic mode and which habit to use. Then there is the routine, which can be physical or mental or emotional. Finally, there is a reward, which helps your brain figure out if this particular loop is worth remembering for the future: THE HABIT LOOP Over time, this loop — cue, routine, reward; cue, routine, reward — becomes more and more automatic. The cue and reward become intertwined until a powerful sense of anticipation and craving emerges. Eventually, whether in a chilly MIT laboratory or your driveway, a habit is born.”
The third industrial revolution goes something like this: Rather than have centralized power plants and grids (both fossil and renewable), we develop a decentralized power grid. Every house and every building would have their own solar panels/renewable energy; each building thus effectively turns into its own little power plant. Energy that isn’t used can be stored using hydrogen fuel cells and distributed/shared/sold on a decentralized grid to other people who want energy. It’s what the internet did for information, except for energy.
Topics that are covered in the book which fascinated me:
Decentralization is at the core of the 3rd industrial revolution and there’s no doubt that blockchain technology will be the backbone of the infrastructure required to make it happen. (great video you can watch here)
Rich Dad Poor Dad outlines out the basics of setting up passive income streams, smart tax strategy, and launching your own business. It’s a classic among the finance/investment crowd and a must read for those starting out on their investment journey, as well as those who have a nest egg they’d like to grow. It’s not a step by step guide, but it’ll change your mindset, which is often the first step in big change.
Kiyosaki starts the book off telling two parallel stories; the rich dad and the poor dad. The poor dad works every day, equates time with money, and thinks money is dirty. He pays his bills first and has a mortgage and is deep in credit card debt. He works for money. The rich dad, on the other hand, gets his paycheck and reinvests it in real estate and other businesses. He pays himself first. He diversifies in stocks. He is a savvy investor, and money works for him.
“ Don’t listen to poor or frightened people. I have such friends, and while I love them dearly, they are the Chicken Littles of life. To them, when it comes to money, especially investments, it’s always, “The sky is falling! The sky is falling!” They can always tell you why something won’t work. The problem is that people listen to them. But people who blindly accept doom-and-gloom information are also Chicken Littles. As that old saying goes, “Birds of a feather flock together.”
No book list would be complete without mentioning Tim Ferriss. This one is a real doorstopper of and one I pick back up every now and then when I’m looking for inspiration. It’s hundreds of pages worth of notes and interviews with word-class performers, split up into three sections “healthy, wealthy and wise.”
What I find most interesting is that everybody’s routines are different. You would think that the ultra-productive and mega-successful would have an organized and OCD routine, planning their lives down to the minute. But mostly they don’t. They just drink a cup of coffee, take a shower, and get started. Day by day they chip away at their goals. While they’ve all achieved extraordinary feats compared to most, their accomplishments are incremental — and eventually extraordinary. There are no “overnight successes.”
Question 1: What if I did the opposite for 48 hours?
Question 2: What do I spend a lot of money on? How might I scratch my own itch?
Question 3: What would I do if I had $10 million? What’s my real target monthly income?
Question 4: What are the worst things that could happen? Could I get back here?
Question 5: If I could only work 2 hours per week on my business, what would I do?
Question 6: What if I let them make decisions up to $100? $500? $1,000?
Question 7: What’s the least crowded channel?
Question 8: What if I couldn’t pitch my product directly?
Question 9: What if I created my own real-world MBA?
Question 10: Do I need to make it back the way I lose it?
Question 11: What if I could only subtract to solve problems?
Question 12: What might I put in place to allow me to go off the grid for 4 to 8 weeks, with no phone or email?
Question 13: Am I hunting antelope or field mice?
Question 14: Could it be that everything is fine and complete as is?
Question 15: What would this look like if it were easy?
Question 16: How can I throw money at this problem? How can I waste money to improve the quality of my life?
Question 17: No hurry, no pause.
This is a distillation of Watts’s best talks and ideas, pulling the practical out of Eastern philosophy into an easy digestible form even if you’re not familiar with Buddhism or Hinduism. He asks some big questions like “what is the universe? How do we change the past? What are you going to buy with your money? And most importantly, how do we take ourselves less seriously?” It gets deep, sure, but it remains witty and relatable and practical.
One big takeaway is the idea of “Confusing the finger pointing at the moon for the moon.” Take reading non-fiction books, for example. Many read to broaden their knowledge. Reading, though, is a great form of procrastination. You could read all day and get nowhere. Don’t confuse the activity for the goal —in other words, don’t jut read books, take action using what you learned.
“There’s a famous Zen story of a monk sitting in meditation. The master comes along and asks, “What are you doing?” And the monk replies, “Oh, I’m meditating so I can become a Buddha.” Well, the master sits down nearby, picks up a brick, and starts rubbing it. And the monk asks, “What are you doing?” The master says, “Oh, I’m rubbing this brick to make it into a mirror.” And the monk says, “No amount of rubbing a brick can turn it into a mirror.” To which the master replies, “And no amount of zazen will turn you into a Buddha.” They don’t like this story very much in modern-day Japan.”
Co-founder of Wired Magazine, Kevin Kelly writes a lot about the future of tech and digital media. He starts by taking a look at the current state of our technology, from mobile, AI, biotech, transportation drones, social media, and so on. He explains how these industries are evolving and provides practical examples of what that could look like (from the importance of questions to the dangers of AI); it all boils down to 12 forces that he believes will ultimately shape the future. They are…
Recommended reading for anyone who feels like I do about the future — concerned and excited. Also, for those scoping out business ideas (in crypto and elsewhere), this will help unearth idea nuggets.
Nassim Nicholas Taleb covers a lot in this book, but most pertinent to blockchain is the agency problem — cutting out middlemen is what blockchain technologies are all about — and increasing trust. The most pernicious type of middleman is what Taleb refers to as the fragilista (no, not a barista), “someone who makes you engage in policies and actions, all artificial, in which the benefits are small and visible, and the side effects potentially severe and invisible.” It’s the doctor who prescribes a statin pill to help you without disclosing their poor track record despite not fully understanding how the drug works; the economist who creates a fiscal suggestion with zero skin in the game, and the company who throws a million plastic straws in a landfill with no repercussions.
Another important concept: the Lindy Effect, which simply states that the longer something has been around, the longer it is likely to stay around. A book that’s been around for 50 years is likely to be around for another 50. Your grandmother is more likely to be right than the Huffington Post. And it’s why the longer bitcoin is around, the more likely it is to be around.
“The psychologist Gerd Gigerenzer has a simple heuristic. Never ask the doctor what you should do. Ask him what he would do if he were in your place. You would be surprised at the difference.”― Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder
Andreas M. Antonopoulos is a pioneer. He’s been living off of bitcoin for the past several years and has real skin in the game. He’s got a great way of simplifying complicated ideas and this eBook is one of the best primers you’ll get on the topic, ranging from history to economics and the technical fundamentals of blockchain. When I’m feeling in the slumps during a bear market, or when I want to get inspired, this is what I read. “I’m just a coder, I’m just a talker; I’m not a terrorist, I’m not a thug. But if I have the opportunity to build an exit from this system, then I will take that opportunity — because I know who the real terrorists are.” You can’t help but be inspired.
Andreas is realistic about the limitations of progress and also takes his time to explain his reasoning in a level-headed, easy to understand way — a testament to his level of understanding and expertise. I gift frequently to those who are just getting started. Highly recommended.
Imaging a world with cryptocurrencies:
This technology allows us to re-envision the social order, creating systems that — instead of authority — use autonomy to deliver order. But it’s better than that, because this form of order is unprecedented. Imagine that every individual has the ability, when they create a transaction, to specify exactly the conditions under which that transaction will be executed and then be absolutely guaranteed that those conditions will be met. What is the value of that to individuals? What kind of world does that create? It certainly creates a world in which the people who are clinging to authority are both terrified and, more importantly, irrelevant.
While James Altucher can be a little over the top, that’s what makes him great. He cuts to the bone. This book is a field guide to the “New World” we live in. You can play by the old rules and get left behind, or you can use these new ideas and become wealthy. He’s lost a lot of money and experienced a slew of failed startups (17 of them), so his stories are always anecdotal, personal and raw.
One of my favorite routines he outlines is the “daily habit.” Write down ten ideas every day. Most of them will be bad, but that’s ok. You’re flexing your idea muscle. “When you have ideas, you’ll quickly get freedom. When you get freedom, you’ll have the energy to build more ideas, to generate more abundance, to live the life you want to live.”
Other ideas from the book 1) connecting two people every day 2) don’t stay at a job just for salary increases 3) don’t do something just for money. A lot of the advice is tried and true (and basic), but it’s reframed to give you a quick jolt in the butt if you’re in a funk.
“Mastery begins when formal education ends. Find the topic that sets your heart on fire. Then combust.”
“I think bitcoin has about a 1 in 100 chance of being a survivor. So I have 1% of my portfolio in bitcoin.”
“Everything in life is about having as many options as possible so you can maximize your freedom.”
Billionaire Peter Thiel is the co-founder of Paypal, founder of Clarium Capital and Palantir Technologies, and investor in more than 100 startups. His book is full of advice on how to think about business, startups, risk, competition and success. Thiel’s two big tips for investing:
Thiel’s clarity in thought and execution can help any crypto enthusiast investor who is looking for an edge. It starts by always asking good questions and questioning the status quo. “What do people agree merely by convention, and what is the truth?” Always ask, “is this true?”
“…if you’re planning to do something with your life, if you have a 10-year plan of how to get there, you should ask: Why can’t you do this in 6 months? Sometimes, you have to actually go through the complex, 10-year trajectory. But it’s at least worth asking whether that’s the story you’re telling yourself, or whether that’s the reality.”
I’d reckon that most crypto traders haven’t read this. It’s not the easiest read, yes, but it’s a classic, foundational work. The new and revised edition has commentary after every chapter that explains the concepts in laymen’s terms, which I found extremely valuable and much easier to digest. A lot of the principles — particularly in terms of risk management— are timeless. Paul Graham reminds us that there is a way to be both an intelligent trader and an intelligent investor. Here are three common ways trading can be unintelligent:
The intelligent investor will, first and foremost, differentiate between both types of activities. Then, they’ll consider all of the factors that might affect both strategies. One of my biggest mistakes has been confusing the two, and then getting upset when I lost money on a trade. Upon further reflection, I was treating it as if it were an investment.
Hodling is an investment strategy that has psychologically sabotaged itself because people are constantly concerned with short-term price but refuse to sell, confusing their investment for a trade.
“The intelligent investor realizes that stocks become more risky, not less, as their prices rise — and less risky, not more, as their prices fall. The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale.”
You have a little bit of money that you are willing to invest/spend. The question is how to diversify your risk, protect your money and grow it outside of the current system. Andrew Henderson has several James Bond-esque stories of his own that gave me an occasional smirk, which he intertwines skillfully with best practices and ideas of what’s possible (and what’s legal).
“Go where you are treated best” is a point that he drives home several times. If the banking system in your country gives you ridiculous fees or if you can’t get a loan, why don’t you go to a different bank (in a different country)? If you feel that you’re paying too much in taxes, instead of complaining and doing nothing, why not move somewhere else? If you’re getting poor and expensive healthcare treatment in the US, why not go somewhere cheaper and better?
“How much will I pay in taxes tomorrow, this month, and this year if I keep doing what I am doing now?” “What changes would I like in my lifestyle that I will not enjoy if I do not make a change?” “How will my retirement plans be affected by continuing to do what I am doing now?” “What will happen in five years if I keep only one passport? Or, what might happen that I am not willing to risk?”
Even though so much has happened in the past 10 years of bitcoin’s existence, this book remains a true gem. Many of the crypto books published in the last few years are poorly written — Popper’s book is an exception. He does a great job of telling the story in a narrative form and it feels less like a non fiction and more like a thriller.
Popper charts the rise of the Bitcoin through the eyes of the movement’s colorful central characters, including an Argentinian millionaire, a Chinese entrepreneur, Tyler and Cameron Winklevoss, the eccentric Roger Ver, and Bitcoin’s elusive creator, Satoshi Nakamoto.
I gift this book often to friends who are just starting out and what to get a good primer on the backdrop of bitcoin.
“…the decentralized ledger underlying Bitcoin was a fundamentally new kind of network — like the Internet — with possibilities that still hadn’t been dreamed up, Andreessen said. He went on: Far from a mere libertarian fairy tale or a simple Silicon Valley exercise in hype, Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era, and a catalyst to reshape that system in ways that are more powerful for individuals and businesses alike.”
Chris Burniske and Jack Tatar do a great job of providing an in-depth technical analysis of the new asset class of decentralized currencies. This goes beyond just the basics of looking at team, product and funding, and really dives deep into the mechanics of the token economy as well as outlining “network value” of projects. (Michael J. Casey and Willy Woo’s analysis are also worth checking out).
Topics explored in the book:
The big thing to keep in mind when approaching the valuation topic is that nobody really has a solid understanding of this yet — it’s like trying to figure out that Apple would be worth $1T from 1994. That said, Cryptoassets is the most detailed book I have read to date that seriously explores the tough question of evaluating crypto projects. A must read for any investor, trader and analyst.
“…one of the most powerful use cases of blockchain technology was to inscribe immutable and transparent information that could never be wiped from the face of digital history and that was free for all to see. Satoshi’s choice first to employ this functionality by inscribing a note about bank bailouts made it clear he was keen on never letting us forget the failings of the 2008 financial crisis.”
We still don’t know who Satoshi is, whether he’s one person or a group of people — and in fact, from what we know he’s never even spent a single bitcoin. His anonymity is probably for the better, but the appeal of mystery is hard to forego. This is an interesting compilation of Satoshi’s emails and posts on forums over the years. It provides a convenient way to parse through what Bitcoin’s creator wrote over the span of the two years that constituted his “public life” before he disappeared. Overall it’s a fun read and will probably be referenced as a history book by future generations. :)
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micro payments impossible.”
Rockefeller, Morgan, Vanderbilt, Carnegie, Harriman, Gould, Frick…If you are interested in how these men manipulated everything to their advantage, and what the costs were to the country’s economy, banks, stockholders — this is the book to buy.
The most admirable baron bribed politicians, abused their workers, and cheated ordinary investors by manipulating their own stock. Many of their actions would be illegal today….or would they? An interesting question to ask is, “what does a modern day baron look like?” Are tech-moguls the modern robber baron?
“…the equally familiar story of Hill as the only railroad tycoon who built his lines free of government aid is demolished in this revisionist treatment. Not only did Hill benefit from land grants when he began erecting his railroad network in Minnesota, but he also played the government for all the financial aid, direct and indirect, that he could glean. In Malone’s perspective account, we see him as clearly the beneficiary of government investment and action, a far cry from earlier depictions of Hill as the self-made man who built an empire with little more than his bare hands”
(Shout out to Taylor Pearson for the recommendation!)
Reading this story felt hauntingly familiar, like I’d been there, standing at the top of a roof ready to jump off. Like it was back to the future, early 2017 in the crypto-sphere. It’s funny how some things don’t change and how some lessons go unlearned.
The book starts with the enormous optimism of the 1920s in the USA and runs through the excitement in investment opportunities from Florida land speculation. People were buying stocks on margin — that is, borrowing money in order to invest larger sums. It was a time when people felt the rollercoaster could climb higher and higher.
It’s frightening to hear the number of times ‘experts’, such as Hoover are quoted as saying the same sorts of phrases we’re sick of hearing today…“the fundamentals of the economy are all essentially sound” or “this is just a minor correction from which the economy will bounce back stronger than ever.”
When it all came crashing down, it crashed hard. The story of the Great Depression serves as a stark reminder to the consequences of blind optimism and power plays within the financial community. (P.S. you can also just watch the Youtube video here)
“The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall.”
Bread, cash, dosh, dough, loot, lucre, moolah, money. What is money, anyways? Historian Nial Fergusson takes us on a journey way back to the Renaissance when the Medici’s spread double-entry booking, all the way up to the present day, delving into the mechanics of CDO’s and the reasons behind our mounting debt and most recent financial crisis. He explores this and much more…
“poverty is not the result of rapacious financiers exploiting the poor. It has much more to do with the lack of financial institutions, with the absence of banks, not their presence. Only when borrowers have access to efficient credit networks can they escape from the clutches of loan sharks, and only when savers can deposit their money in reliable banks can it be channelled from the idle rich to the industrious poor.”