STATS
ideas? → [email protected]
Welcome to Stats, our signature report.
If you want to invest like we do. This is how we see the world.
OUR WAY
We started with the simple concept that investments are fundamentally a byproduct of learning.
We don’t buy the gut-feeling investing style, and we don’t outsource market risk due diligence.
So Warren Buffett is investing in your company? Good for you. That does not mean anything to us.
We believe that rust never sleeps, and there is no such thing as stable conditions or equilibrium prices.
Just like weather reporting, it is absurd to demand certainty from forecasts. Turning points are very hard to observe on the spot.
By turning point we mean the moment a change accelerates. From gradually to suddenly. From heresy to dogma.
But it is possible to have macro-timing views. Are we standing on the pre- or post-event side?
We are obsessed with timing.
Our methodology (⦿ link) is called velocity of propagation in light of that. Early entry points always have an expiration date.
Other investment houses have coined the term evolution of the category.
Evolution is a great word, because biology is not linear. And so is change.
NON-STOP
Because understanding is expensive and it takes a long time to “get in shape”, and a short time to become fat, we publish this report quarterly, but track things relentlessly.
It is the only approach we deem reasonable to help us be early. Early, at a general level, means before others understand.
Stats help us (not you) understand and identify things early. There are things we don’t need to repeat because we already have considered them. There are levels of uncertainty at which we are ok operating. We are in shape, and we stay in shape.
The untrained eye will see little changes from one quarter to the other.
True conviction cannot be borrowed.
Opportunities are not about luck. Most people cannot see opportunities because they have not done the learning work.
For the lazy people, opportunities are invisible.
If we don’t get the macro timing right, everything else is irrelevant.
When we invest, we are essentially underwriting our conviction on market timing. An incredibly difficult (if possible) task.
The execution risk is not ours to de-risk, that is the role of fanatical founders.
HUMAN CURATION
Stats is done in-house, which means we do not delegate understanding or outsource the learning work.
This is the research and intelligence that guides our conviction and therefore our investments.
This does not mean we don’t use technologies — of course we do. But our research is not AI-driven. Above all, we value independent thinking. For that reason, we prefer long-form, disciplined, tedious, AI-discouraged, unvarnished research. The closest thing to investigative journalism.
Plus artificial intelligence or machine learning is nothing more than the throughput capacity of infinite interns. AI reasons by reducing everything to mathematical distances, that is not how animal reasoning works. AI is anything but intelligence. It’s just ubiquitous knowledge. And facts are cheap.
100X 10Y
Our research is macro and secular and global, but because entry points are so hard, and opportunities depend on what you can see, we focus mostly on USA market risk.
And because conviction is not priced in real time, and all great things take time, we look on 10-year horizons.
What makes a great market for us, one with the potential for fast growth, is one where we think the threshold of 100x in 10 years is likely. If averaged out, that is a compounded annual growth rate of 58.49% (⦿ link).
But CAGR is a backward looking metric. Growth is not linear, and entry points are hard. It is close to impossible to sustain high growth without setbacks. So it’s even harder to choose the best 5 years. Decade thinking allows margin for error.
NOT FINANCE
We receive applicants to be part of our research team who like to highlight their finance background.
This is not done by finance people.
People who work in finance have the audacity to think they know about investing.
Finance is just a back office operational job. All financial edge is an operational speed edge.
There is nothing sophisticated about working in finance. It’s just the time cost of money. You can learn that in a week, online, for free.
(⦿ link) (⦿ link)
Of course all great investors know finance, do you think Gustave Eiffel did not know how to bolt iron or weld steel?
Finance is trivial to investors.
The opposite is not true: most finance people have no idea about investing.
There is no conviction building in the skill of finance. And the only measure of true conviction is underwriting uncertainty.
Courage cannot be faked.
STATS 2.0 · POWERED BY HEARTBEAT
Because Stats is made to be used primarily by us, there’s an idiosyncratic way we go about it.
And the published PDFs are just our own cheat sheets or “translation maps” to learn/remember fast.
As we want to make our research as transparent as possible, and given the demand to give access to our thought process, we now use Heartbeat (⦿ link), a system that allows us to give you paywall access to the published intelligence database that feeds into Stats.
Use Heartbeat to search by keywords, build your own mini report, see the supporting reading list, go down the rabbit hole of looking into the profiles of all the companies and people tagged, etc.
We really like it, and use it everyday, more than we use Spotify (⦿ link).
NO SELL SIDE
Our reports have never displayed ads. They don’t have clickbait titles. Our business model is not to get your attention.
We have never named a company or a person because it’s trendy or because someone has told us (which has happened).
We don’t care if we name competing companies to those of our own investments.
If you want a pretty market outlook, go and read sell side research reports of public equities, or any of the crap that Goldman Sachs et al produce. Just so you know, those are just low quality research teams, with a summer intern updating an Excel spreadsheet done by the previous summer intern.
“So you know that they’re doing, right? Yeah.
They’re selling their dog shit bonds, then they go to another bank and short the shit they just fucking sold.
This level of criminality is unprecedented, even on fucking Wall Street.”
— The Big Short (2015)
FINAL NOTE
An idea is a desire to make something, but not a reason.
Too many startups are flying a kite with no wind.
Look for wind.
