The Anti Bubbles

Book Title: The Anti-Bubbles – Opportunities heading into Lehman Squared and Gold’s Perfect Storm

ISBN: 1631579827

How strongly I recommend it: 3/5 Stars

An easy read which I was able to read in one sitting. This book is basically a structured critique on modern monetary theory with practical applications on how to trade an eventual market correction.

The central premise in this book is that we are going to (eventually) see somewhat of a doomsday scenario because Central Banks have taken monetary policy to extreme levels and they are not infallible. Fortunately, there are ways in which investors can trade the ‘anti-bubbles’ that will show up.

I liked the application of economic theory to real world investment ideas but this book did feel a little poorly written with a lot of repeating and quotations from notable investors without enough explanation.

Amazon Page Link: Click Here

How I discovered it? The Ultimate Masterclass for Macro Investing (Youtube Link)

Who should read it? Aspiring Macro Investors


SUMMARY

Starting with Ben Bernanke’s decision to cut interest rates to zero in response to the 2008 financial crises, Central Banks across the globe have become addicted to low rates, Quantitative Easing (buying Government Bonds) and direct monetary injections (buying high yield credit). Parrilla argues that these tools are extreme applications of monetary policy which have created bubbles in the economy that will need to eventually correct.

As a result of these extreme policy responses, Parrilla argues that; 1) Currencies have become over-valued due too much money printing, 2) Volatility is underpriced as Central Banks continue to prop up markets and 3) Due to the widespread impact of monetary expansion, assets are going to be increasingly correlated to one another.

So how do you trade this? Parrilla offers three trading strategies to respond to the above. 1) To be long Gold (preferably through ETF’s), 2) To be long implied volatility through long biased options and 3) To be long tail risk by betting on contrarian outcomes (e.g. being long Gold and short non-USD currencies).


KEY TAKE-AWAYS

  • Currency Wars

It is not possible to look at monetary policy in a single country, in isolation. The reality is that when countries devalue currencies, this basically exports deflation to other countries. In turn, other economies need to either lower their own currencies (via reducing interest rates) or become uncompetitive. This incentivizes currency wars and even more extreme policy action which creates a destructive cycle.

  • The Search for yield

‘Risk-Free interest’ has been turned into ‘Interest Free, Risk’ in a zero interest rate environment. In other words, in the search for yield, money managers have lended to worse borrowers, for longer maturities. This search for yield in an extremely low yield environment, has benefited the weakest borrowers the most and has encouraged speculative bubbles.

  • False Diversification

Money managers have incorrectly assumed they are diversified because they own different asset (e.g. equities, property, credit). However, when Central Banks are effectively propping up asset prices (through the ‘Central Bank Put’), this is not diversification – everything will go up and down together.

  • Low Implied Volatility

‘Central Bank Put’ puts a floor under prices and insures the market that the Central Bank will step in as soon as things go wrong. This then artificially lowers implied volatility in the market. As most VAR models use implied volatility to calculate risk, it then encourages more leverage and risk taking.

  • Ways out of this financial predicament

There are three ways out of this monetary mess we have got ourselves in. First option is for Central Banks to reverse policy as the economy begins to improve and we see inflationary pressures. However, the problem with this is that the sequence and extent of reversal will be harder the most unconventional policy becomes.

The second option is for Central Banks to hold Government Bonds till expiry and then decide what to do i.e. basically just buys the Central Bank more time to make a decision.

The third and most likely option is that eventually, all this debt will need to be monetized and therefore, there will be a massive devaluation of currencies and a rebasing that will need to happen. This will prop up real assets such as Gold.


FAVORITE QUOTES/STORIES

‘Paper currencies eventually converge to their intrinsic value: paper’ – Voltaire

The official Gold Reserves of the Bank of Japan would buy less than 5% of Apple’s Market Cap

Currency Experiments

Currency experiments have tended to give bias towards monetary expansion and Central Bank excessiveness.

In 1933, the US decided to go off the Gold Standard and gold was no longer accepted as legal tender. By 1934, most private possession of Gold was outlawed, forcing individuals to sell it to the treasury.

In 1944, the Bretton Woods system fixed currencies to the USD which was effectively, tied to Gold but once again, in 1971, due to worsening balance of payments, depleting Gold reserves and the financial burden of the Vietnam war, Nixon put an end to the coverability of the USD to Gold, which basically ended the Bretton Woods system of fixed financial exchange.

Reflexivity Theory – George Soros

Fundamentals dictate prices but prices also dictate fundamentals – it goes both ways.

In contrast to rational expectation theory that only real world fundamentals drive real world supply/demand, reflexivity theory argues that it is actually expectations that drive real world behaviors which then lead to new expectations. This explains financial bubbles and excessive speculation.

Gold Equities as an ‘up and out call’ on Gold

People normally think that buying Gold Equities = being long Gold. They are not one and the same. A good way to think about Gold equities is that they are an up and out call option on Gold – if the price rises too high, then Gold equities are likely to underperform e.g. they face extreme political risks especially in politically sensitive countries or companies with Gold hedges may actually end up distressed due to margin calls. So Gold equities basically cap your upside on Gold and it’s much better to buy ETF’s or calls.

Think Like A Monk

Book Title: Think Like A Monk

ISBN: B07YF3VPSP

How strongly I recommend it: 2/5 Stars

Fame, money, glamour, sex – in the end, none of these things will truly satisfy us. We’ll simply seek more and more, and in the end, we’ll live in a circuit that leads to frustration, dissatisfaction, unhappiness and exhaustion. In light of this, Shetty tries to solve a common predicament – how can we train our minds to find peace, calm and purpose?

Overall, I thought this was an average read with a bit too many quotations and anecdotes. Shetty doesn’t necessarily have an original message (I found a lot of similarities between him and other motivational writers, like Tony Robbins), but maybe that’s a sign that this way of thinking, really does work.

Amazon Page Link: Click Here

How I discovered it? Christmas (2020) Present

Who should read it? Broad based appeal. Easy read.


SUMMARY

This book is centered around three key steps the reader needs to take to embark on this journey; Letting Go, Growing and Giving. Letting Go is about finding authentic goals and motivations in life. When reading this chapter, it was a surprise for me to realise how many of my desires are being fed by external factors (e.g. what will make my parents proud or what I should be doing at my age).

The next step in this journey is to ‘Grow’. By this, Shetty means turning your goals into a purpose (or ‘Dharma’). This is like a mission statement for what you want to achieve – the best ones, will be something you’re passionate about, you’re good at and is useful to the world. Once you have a Dharma, you need to build a routine around it i.e. wake up early, be uniquely focused and frequently visualize where you want to be.

The final step in this journey is to ‘Give’. Shetty argues that the highest purpose in life is to live in service to others. This doesn’t necessarily mean giving everything away, but trying to make the lives of others better, will help to remove some of the negative emotions that you can have about yourself.


KEY TAKE-AWAYS

  • Always try to be Authentic

Only when you tune out OEO’s (Opinions, Expectations and Obligations) will you realize what you truly want. So many of our desires are a reflection of what we think other people expect from us, that we live in this trapped identity.

  • Monk Mind – Find time to reflect

Shetty refers to two parts of our minds. The first is the ‘Monkey Mind’ which is pre-occupied, chaotic and selfish. Then there’s the ‘Monk Mind’ which is  thoughtful, objective and detached.

By creating spaces for reflection such as daily journaling and meditation, you can use the ‘Monk Mind’ to find balance, especially after long, stressful days.

  • Cause of fear is attachment. Cure for fear is detachment

When you disassociate yourself from things, you become less fearful. This is a very stoic way of looking at the world but can help manage some common setbacks in life.

  • Be Present: Single-task whenever I can

Studies have found that only 2% of us can multi-task effectively. Single-tasking is about focusing on one thing and doing it well. Ways to incorporate this in our daily lives include, blocking out time to not use any technology, being present in every moment and training our minds to do mundane tasks really well e.g. brushing each tooth for 4 seconds.

  • No single person can be a complete package

Expecting one relationship to provide everything you need in life, is unrealistic. Instead, you should look to build a unit of people around you that can service your different needs; e.g. having someone for emotional support, someone for career support, someone for intellectual discussions.

  • You have nothing to give as it is not yours in the first place

Interesting perspective. Most things you supposedly own, don’t truly belong to you. Your material wealth is just a function of things you cannot truly control (e.g. upbringing, intellect, luck). When you die, all of these things are left behind. Therefore, losing things or giving them away, does not truly cost you, anything.


FAVORITE QUOTES/STORIES

I am not what I think I am. I am what I think, you think, I am

Asch experiment – ‘Group Think’

Individuals were asked a basic question with an easy answer. Actors in a group were intentionally told to choose an incorrect answer. 75% of the time, the real participants in the study, would be influenced by the incorrect answers given by the actors.

Group think is dangerous. You are what you surround yourself with. So if we are surrounded by gossip, negativity and conflict, we will see the world in those terms

Our fears are more numerous than our dangerous and we suffer more in our imagination than in reality – Seneca.

Kevin O Leary – before he goes to sleep each night, he writes down three things he wants to do the next morning before he talks to anyone besides his family.

Multi-tasking and the dopamine hangover.

Multi-tasking releases dopamine in our bodies. This is an addiction pathway so we want to stimulate it more in order to get more dopamine. Too much dopamine however means that we don’t produce serotonin, the contentment chemical.

Story of Brian Acton

He worked at Yahoo for eleven years. Applied to Twitter for a job and was rejected. He tweeted about it and accepted that it ‘was ok as it would have been a long commute’. Then he gets rejected by Facebook. He Tweets, “It was a great opportunity to connect with fantastic people’. Ultimately, he ends up building Whatsapp and sold it to Facebook for $19bn. Express gratitude in life as you never know what will happen next.

Most common regrets of the dying

I wish I’d expressed my love to people I care about

I wish I hadn’t worked as much

I wish I’d taken more pleasure in life

I wish I’d done more for other people

The Black Swan: The Impact of the highly improbable


Book Title:
The Black Swan: The Impact of the highly improbable

ISBN: 978-1400063512

How strongly I recommend it: 2/5 Stars

The central premise of this book is that random, profound events, or ‘Black Swans’, occur frequently, and we are pretty bad at dealing with them.

The ideas discussed in this book are extremely valuable and they have far-reaching implications. I can relate to a lot of what Taleb has to say about human biases. However, this was by no means an easy (or enjoyable) read. Taleb has a tendency to go off on tangents, spends way too long emphasizing particular points and at times, the book reads like more an academic text with limited real-world applications.

In short, a good book but probably 150 pages longer than it needed to be.

Amazon Page Link: Click Here

How I discovered it? I often come across the term ‘Black Swan’ in a financial setting. I bought this book because I wanted to understand what that term actually meant from the person that coined it.  

Who should read it? Anyone interested in probability, markets and portfolio construction.


SUMMARY

Taleb starts with outlining human biases that encourage us to neglect or misunderstand Black Swans. The fundamental problem is that the real world is too complicated to rely on solely past data, to make inferences about the future. As a result, we will continue to experience dramatic, random events (good or bad) that our models fail to predict.

Taleb then moves on to explain that the optimal way of handling Black Swans is to target uncapped returns with limited downside (‘lottery tickets’). In other words if you know you’ll experience a Black Swan at some point, you should set yourself up to benefit from it by having extremely high pay offs when and if it occurs. Some examples include living in a busy city because of the higher likelihood of a serendipitous encounter with someone else, choosing a career path where you can scale infinitely and barreling your portfolio between extremely risky and extremely safe investments. More on those ideas below.


KEY TAKE-AWAYS

  • What is a ‘Black Swan’?

Black Swans are (1) Outliers (2) Profound and (3) Retrospectively predictable.

In simple terms, they are extreme events which have a big impact and appear to be predictable, but only after they occur. Classic examples could be 9/11, Black Monday and Covid19.

  • The problem of Induction

The way we formulate knowledge is by inferring from past events e.g. I know burning is a painful sensation because I recall what it felt like to touch something hot.

In a similar fashion, most predictive models use the past, to predict the future. However, this process inherently ignores Black Swans because it assumes that the past is representative of the future, yet extreme events can drastically alter future outcomes.

  • Just because it happened, doesn’t mean it was going to happen

The only way to determine causality is by conducting experiments (and observing the alternative outcomes). A fundamental failure of traditional schooling is that you’re generally taught to infer causality from backward looking history. Whilst it’s not always possible to consider alternative scenarios, when it is possible, we should focus on doing that.

  • Key Human Biases to keep an eye out for

Taleb covers a number of human biases which weigh on our thinking. The one’s I could relate to the most, are below. I want to be more aware of these biases in my own thinking going forward.

Confirmation bias – applying greater weighting to data which confirms our original view

Narrative fallacy – creating stories with causal relationships to explain things (even when causality isn’t proven to exist)

Ludic Fallacy – thinking of relationships in linear terms e.g. Every 1 inch of rain increases road traffic by 10minutes

Silent evidence – drawing conclusions based on evidence which survived, only e.g. using odds of getting rich at a casino from the vantage point of winning gamblers only but excluding all those who started in the cohort.

Tunnelling – focusing too much on what we know but don’t want to focus on what we don’t know.

  • We live in Extremistan

Taleb distinguishes between two types of worlds; (1) Mediocristan (2) Extremistan.

Mediocristan is a pretty simple world where the more information you have, the better you will be at predicting things. This is because the law of large numbers applies here i.e. the more data you collect, the more information you will have about the data set. Examples of data sets which fall into this category are things like the height of adults living in the UK.

Extremistan is more complicated. More information doesn’t mean better predictability. Outliers exist and have a huge impact on the average e.g. average wealth in the US.  Most human made data sets fall into this bucket.

  • Most real-life events don’t fit the Bell Curve

If you believe that daily stock market returns follow a bell curve (or normal distribution), then returns should hover around a mean and extreme events become infinitely less likely. Under this assumption, a day like Black Monday in 1987, where the stock market declined by 23% in a single day should only occur once in several billion years. Clearly that doesn’t hold up. The same applies for most real world events. (The scary thing is that normal distributions are assumed for many risk management models like VAR calculations to determine trading risks)

  • Aim for Convex Returns!

Black Swans will happen and you don’t know how they will impact you (they can be positive or negative). In investing therefore, you should try to set yourself up for as much convexity in returns as possible. In simple terms, buy (cheap) options with limited downside and uncapped upside. The only thing you know is that something unpredictable and profound will happen (but you don’t know what that may be).

One way to do this in investing is by barreling your portfolio. Keep 80-85% in extremely safe, low volatility investments like Treasuries. Then put the rest in extremely risky, speculative investments (like call options). This is how Taleb made his fortune.

Another way to do this is to have a speculative portfolio but to insure it against a large drop (of say 15% of losses). This is something I need to think more about applying to my own portfolio.


FAVORITE QUOTES/STORIES

Turkey on Thanksgiving Day

Knowledge gained from observations has weakness when we live in Extremistan (see above) where extreme events take place. Take the example of a Turkey being fed everyday in the run up to Thanksgiving. The day prior to Thanksgiving, the Turkey will think humans are extremely generous and caring (to give it so much food). On Thanksgiving day, the Turkey will have realized this was not a good prediction!

What you know, cannot really hurt you. It’s the stuff you don’t know, that can really hurt.

Knowledge is built on falsification not on verification.

(Non) Scalability of returns

Taleb uses the example of choosing a profession to emphasize the power of having infinitely scaleable returns. If you choose to be a prostitute, you will be inherently limited in the amount of money you can earn, as this is directly a function of your time. However, if you decide to create a software business and then lease that out to companies, you have uncapped potential returns as this is not a function of your time (i.e. you can sell the same software to multiple businesses).

Happiness

Anecdote in the book but interesting experiment. Happiness depends on the instance of happy feelings and not on the severity of that feeling. In experiments, people who earned $100k/year over a period of 10 years, were happier than those who received $1m in one lumpsum payment in Year 1.

Think outside of the box

A good example of the Ludic Fallacy (people thinking inside of a box, using theoretical models of Mediocristan to predict outcomes in Extremistan, which then means they end up missing the complexities of real life problems).

Imagine you’re told that a die has been thrown 100 times and it has landed on heads 99 times and on tails once. Now you’re asked to predict the odds of landing on heads. Most people will say its 50%. The out of the box thinker will argue that the chance of landing on heads 99 times in a row is so small, that clearly this is not a fair die.

Evolutionary bias

A lot of our biases in thinking come from evolutionary traits. One such trait is to assign causality to events by creative stories linking things together, even if they are not actually causal. This is referred to as the Narrative Fallacy. Evolutionary biologists think we do this because it’s a lot easier to hold stories in our heads than just random data.

The 4-Hour Workweek

Book Title: The 4-Hour Workweek

ISBN: 0307465357

How strongly I recommend it: 5/5 Stars

One of the few books that have made a permanent impression on me. The 4-Hour Workweek makes me question whether up until this point, I simply misunderstood life. I will say it is hard to see things the same way as I did before I read this book and for that I’m immensely grateful for the book suggestion.

The question this book tries to answer is how you can structure your life to maximize freedom of time and money (i.e. doing what you want, when you want). These are deemed to be the two key instruments of a rewarding life and Ferriss lists practical steps on how the reader can achieve this, in the same way that he has managed to do over the years. In doing so, Ferriss turns the traditional model of study-work-save-retire, on its head.

Understandably for such a large audience, this book isn’t always relevant and for me, it was the section on remote work which I found to be less useful.

Amazon Page Link: Click Here

How I discovered it? Recommended by friend

Who should read it? Anyone and everyone.


SUMMARY

The classical template for life is that you work hard, earn money and then retire to do all the things that you want to do. Ferriss dismisses that idea as lazy thinking; the reason most people stick with that plan is because they are uncertain about what they want to do in life, are insecure about their abilities or fundamentally misunderstand life itself.

Ferriss’ four stage plan (D-E-A-L) is based on firstly defining your life goals, eliminating the obstacles/noise to give yourself time to achieve them, automating the process of generating income to service those goals and finally liberating yourself from the office to be able to have maximum mobility. The ultimate goal is to be free do what you want, when you want and where you want. Those that pursue this freedom of time, money and mobility to realize their life goals are considered part of the ‘New Rich’.


KEY TAKE-AWAYS

  • Define life goals and revisit these regularly

Most people don’t know what they want from life. This puts you in this anxiety fed rat race where you just work for the sake of working, without stopping to achieve the things you really wanted to achieve. Goal set regularly, have a time line for what you want to do (and model out how much money you need to generate in order to do those things). Do these things regularly to avoid life passing by.

  • Don’t sacrifice unhappiness in your good years for happiness in the bad

There is no point sacrificing unhappiness in your early years to be able to spend the last remaining years of your life being happy. No matter the size of the pot of gold that you have in your worst years, it’s a bad trade and it is not worth it.

  • Experiences formulate desires

Most people don’t actually want to be rich. They want to experience what they believe that wealth can buy them. Those experiences are more accessible than most people think.

  • Plan more ‘mini retirements’

The classical retirement model is flawed. Most people get bored when they retire and you are much more limited on the experiences you can have in your old age. Mini-retirements are necessary to balance between work and rest and to have the experiences you want to have, before it’s too late.

  • Use the 80/20 Rule to increase free time

80% of outcomes are generated by 20% of inputs. Use this rule to de-clutter and eliminate inefficiencies holding you back from your ultimate goals.

  • Batch tasks together

Being busy isn’t the same as thing as being efficient (normally they are inversely correlated). Create simple processes, good systems and reduce noise. Some good examples are to batch email reading (instead of trying to keep up to date every second), focus on one major task per day and do it well and to use daily news summaries instead of frequently reading the paper to spot the stop stories.

  • Create a system that can replace you

The ultimate goal is to create a system of generating income that is bigger than you, so that you can leave when you want to do the things that you want, and you have cash flows that support those goals.


FAVORITE QUOTES/STORIES

Fable of the Fisherman

One day, an American businessman on vacation in a small fishing village in Mexico, see’s a local fisherman’s boat docking in the early morning. He asks the fisherman how long it took him to catch all of his fish and the fisherman replies that it was only a little while. When pressed why he didn’t catch more fish, the fisherman replies that he has a busy day; he plans to take a siesta with his wife, stroll the village, play with his kids, sip wine and play the guitar.

The businessman is in shock. He suggests the fisherman consider buying a bigger boat to fish in, and then with the proceeds from the extra fish he would catch, to invest in more boats. Ultimately, the fisherman could expand into the distribution of the fish in the US and then eventually IPO the business and make millions.

The fisherman asks the businessman, what he would do then (after making said millions). The businessman replies, he would be able to move to a remote fishing village in Mexico, fish a little, take a siesta with his wife, play with his kids, stroll the village, sip wine and play the guitar.

Never forget that money is a means to an end.

Freedom multiplier

Most people look at freedom in terms of financial freedom whereas in fact, it is a combination of 4 W’s – the freedom to do; what, when, where and with whom you like.

Retirement Planning

Retirement planning is like Life Insurance. It should be viewed as nothing more than a hedge against the worst case scenario; that you become physically incapable of working and need a reservoir of capital to survive. It should NEVER be the GOAL.

In fact, the very concept of retirement planning is flawed; it assumes that you either dislike what you’re doing now (so you’re trading off the present), most people won’t have enough to sustain their same lifestyle in retirement (i.e. most will fall back into a lower middle class lifestyle which isn’t particularly exciting in the first place) and if you do have sufficient savings, you’re probably so driven that you will be bored when you retire, so whats the point of planning for it anyway!

Worst case scenarios

One contributing factor for indecision is trying to get the timing right. In reality, there is never the perfect time for anything. The stars will never align and the traffic lights of life will never all be green at the same time. You MUST take a chance.

One way to avoid indecision is to think in terms of worst scenarios. Ferriss used this when he was considering taking an extended time off in Europe. If you start with the absolute worst scenario, you will realise that most things are generally not that bad and the unlimited upside potential on your life, far outweighs the potential downside risks.

Parkinson’s Law

Tasks will swell in perceived importance based on the time allocated for their completion. So they will naturally take longer, the more time you allocate to them. Instead, use the 80/20 rule to get things done sooner. Ask yourself daily, if I only accomplish one thing today, what would it be?

Time value

Work out a daily rate for yourself. Anything that you can do below that rate, you should outsource.

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

Book Title: Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

ISBN: 006230125X

How strongly I recommend it: 4/5

Marked down because the writer flip-flops between Musk’s businesses and resultingly, it is somewhat difficult to keep track of the chronology.

Amazon Page Link: Click Here

How I discovered it? Youtube (credit to Ali Abdaal)

Who should read it? Anyone trying to make sense of Musk’s sometimes erratic behavior. Focused on Musk’s trials and tribulations in his businesses and less his personal relationships.


SUMMARY

The story of how Elon Musk became who he is today.

Most of the book is dedicated to Musk’s experiences with Tesla, SpaceX and Solar City (his three current and largest businesses), but it also covers some of Musk’s early days of moving to the US (along with his brother, Kimbal) and his earlier ventures, Zip2 and Paypal.

In sum, this is a story of how one man, takes a series of high risk (typically all-in), bets and managed to pull it off. It’s refreshing to hear about Musk’s struggles, often under-reported, and how close he actually gets to failure.


KEY TAKE-AWAYS

  • If you believe in something, just go for it

Musk pockets $22m from his first venture, Zip2. He puts most of that money into Paypal. He then makes $180m exiting Paypal and puts $100m into SpaceX, $70m into Tesla and $10m into Solar City. At one point, he’s so heavily invested to his companies he’s living off his credit cards.

  • No exit without proof of concept

I’ve read too many stories about multi $m exits. Reality is that you need to have proof of concept and scale before that’s even remotely possible.

With Zip2 (Yelp-like business), Musk exited with $22m after about five years. But to get there, he needed VC funding, was actively hiring staff and was still hustling with his brother.

At the time of exit, Zip2 was worth $307m (purchased by Compaq Computers).

  • Don’t compromise on vision

Musk was booted from his company’s multiple times. At Zip2, he was replaced as CEO by a VC backed manager. At Paypal, he was booted by Peter Thiel (whilst Musk was on his Honeymoon in Australia).

Since then, Musk remains committed to maintaining control of the ultimate vision of the company and to never lose that.

  • Not knowing about a certain industry is often a blessing

Musk knew very little about rockets/space before founding SpaceX. Same for his knowledge of auto manufacturing prior to Tesla. This allowed him to come up with more creative ideas and ask the right questions, like; why did the US rely on the Russian space program to get to space and why can’t you make a car out of Aluminum instead of steel.

  • You will hit rock bottom multiple times

Musk went from flying in his private jet, to having to take Southwest commercial flights between LA and SF. He lost a child, got sacked on his honeymoon, got screwed over by investors/friends and was openly mocked for his ideas.

  • There are strong network effects in the start up space

A lot of Musk’s success can be attributed to having a good network and a brand image. Any venture he backs today is instantly credible and he’s used his network to further his business interests. Building something small first, makes it more likely that you will be able to build something big later.


FAVORITE QUOTES/STORIES

Buying Russian ICBMs

Musk has $20m to buy three rockets. He goes to Russia to buy ICBM’s (Inter-Continental Ballistic Missiles) to retrofit (with the help of an ex CIA operative). The Russians want $8m each, he offers $8m for two. In the end he storms out, gets on a plane back and then decides he’ll just make the rockets himself. He puts together his own plan and undercuts the market by huge margin.

Tesla bankruptcy Deal

Tesla was on the verge of bankruptcy. One of the main investors, ‘VantagePoint’, would not participate in another round of funding because they felt it undervalued Tesla but in reality, they were hoping it would go bankrupt and they could then sweep in and sell its business segments for a profit. Musk raised as a debt round instead (which Vantage Point could not block), and the deal to raise $40m closes hours before Tesla would have gone bankrupt (on Christmas Eve).

Google takeover (2013)

Tesla built it’s Model S but it wasn’t a huge success as it had multiple operational failures and was expensive to build. Musk makes a huge drive into marketing and convinces everyone at Tesla that they need to start selling more cars. He reaches out to Larry Page (friend) and Google Co-Founder for a buy-out, and Google was set to buy Tesla for $6bn (with Musk remaining in charge for eight years). A few sticking points held up the deal and that gave Tesla just enough time to boost sales…the deal subsequently fell apart. Tesla in May 2021 had an Enterprise Value of $710bn.

Mary Beth Brown story

One of his closest assistants asks for a pay rise (in line with board member pay) because she is working just as hard. Musk ask’s her to go on vacation for a couple weeks so he can understand how taxing her job is. When she comes back, Musk fires her as he realizes he didn’t actually need her services.

Energy inefficiency

Conventional cars are only 10-20% efficient at turning fuel into kinetic energy. EV’s are 60%+.

In one hour, there is enough solar energy pointed at the earth to fuel an entire years worth of energy consumption.