leaf

The above image outlines the vulnerabilities of families, categorized into several major parts:

1. Family financial responsibilities
2. Major losses in family wealth
3. Family cash flow management
4. Family debt management
5. Family relationships and mindset

Taking families as an example, I will correspond the issues they encounter with the vulnerabilities shown in the image, and summarize them for everyone (though it involves spoilers, to be honest, this movie is just a job, not much to look forward to):

✔️ Midlife unemployment - Family cash flow duration issues

✔️ Parents hospitalized just as unemployment compensation runs out - Family financial responsibilities, parents' retirement

✔️ Previous investment in P2P resulted in loss of savings - Major loss in family wealth

✔️ Wife is a full-time homemaker - Family cash flow sources

✔️ Child attending an international school - Children’s education and expectation management, family income and expenditure cash flow

✔️ Mortgage of 15,000 per month - Debt management

✔️ While watching the movie, I also lamented: why is it so intense! Why is it so typical? The screenwriter is really skilled.

Later I thought, hey, life is far more exciting than scripts, and you never know!

Midlife is inherently a window period where various risks can easily occur concurrently, coupled with everyone’s previous optimistic expectations and obsession with optimal solutions, it’s not unreasonable.

Finally, following the order of the accompanying image, let’s summarize the thoughts on how middle-class families can be anti-fragile:

1. Family financial responsibilities - Proper risk hedging to lower expectations for parents' retirement, personal retirement, and children's education.

2. Major losses in family wealth - Lower expectations for investment returns. Aim for reasonable returns, higher Sharpe ratios, and lower volatility; combining these means: reasonably allocating the proportion of equity and fixed-income assets.

3. Family cash flow management - Redundancy, strive for dual-income status, budget for major expenses, maintain a flexible lifestyle, compress necessary living expenses, work hard to achieve a high savings rate, maintain an optimistic mindset, prepare for the future, and actively explore income possibilities.

4. Family debt management - Manage debt amounts and durations well.

5. Family relationships and mindset - Communication, unity, and lowering expectations are sources of resilience.

In fact, personal struggle must consider historical processes... and also look at international and domestic economic cycles. What is fate? The years marked with 🏠 indicate a surge in housing prices, those marked with 🐂 indicate a stock bull market, and those marked with 🌊 indicate monetary easing. The virtual and real red circles signify the generational entry into society to start earning.

For those born in the 80s, there are still options for entrepreneurship by midlife.

For those born in the 95s, what options are there? The primary market is nearly gone, leaving only opportunities to create accounts or sell insurance.

What I want to say is that many things become a bit tiresome after being overly familiar.

6. The value point here suggests that the term "middle class" implies:

We are responsible for our own assets, working as hard as we can while simultaneously reducing our starting point, sacrificing some immediate pleasures in the process to reap the rewards of so-called delayed gratification in the future.

Our misfortunes stem from our failure to make good use of our time, energy, and resources—this entire value system is embedded in our life rhythms, which is highly inertial.

7. Now, numerous pieces of evidence tell us that the entire set of beliefs you have learned in the past is wrong, and you need to change.

We may never have felt that this set was wrong; we just discovered that no matter how we maximize this set, the returns seem to be less than before.

8. I don’t know how to describe my doubts and discomfort with this set, so I can only provide examples to illustrate:

For instance, the must-read book in our field that is most often recommended, "Rich Dad Poor Dad," features the poor dad as the most typical middle-class figure, a university professor who views his house as his biggest asset and is always anxious about salary, 401K, medical care, vacations, and benefits. He loves the idea of tenure, even though achieving this qualification is quite difficult; tenure represents the stability most loved by the middle class.

Sounds good, right? No!

This perfect father figure among our parents from the 60s is precisely the character despised in this book—a rigid, conservative, short-sighted, and unambitious mediocre, whom Kiyosaki compares to a cow that anyone can milk.

Kiyosaki's idol is the rich dad, who deeply understands the rules of money and can frequently buy and sell assets in the market.

9. This is the value system of this book—despising labor and implying that labor ranks relatively low in the priority of distribution.

10. When one reaches a certain age, we should consider whether this ranking is applicable in different environments.

For example: In our case, is the financial industry still a place for the elite, or is it gradually becoming a type of state-owned enterprise infrastructure? I wonder if anyone has thought about this issue.

One can only say that no beating is without reason; many things have profound fairness.

11. Is the middle class merely an illusion of systemic liquidity? Or is it the inevitability of individual effort?

Thinking about this question can actually help let go of many self-righteous obsessions.

In simple terms, this exploitation structure is as follows:
r > g > w

The return on capital investment r > the growth rate of the economy or social output g > the growth rate of workers' income w

This structure represents the profit order of all social classes.

The dominance of finance has brought the middle class close to the identity export in newly liberalized developing economies, while at the same time, in countries long considered to have a mainstream middle class, it has squeezed the resources owned by families.

13. I’m sorry, I can’t provide answers either, but I have indeed started to read some grand, pretentious, vague, and metaphysical books, hoping to find some answers.

At work, there is inevitably more internal friction, such as resisting certain things.
2. Every economic cycle looks crystal clear in hindsight, but it’s often hard to see when you’re in it.

3. Don’t let tomorrow’s rain soak today’s self.

4. Don’t linearly extrapolate the current state, treating the present as eternal.

5. Is class ultimately a matter of timing in the era? Is it an illusion of systemic liquidity? Or is it the inevitability of individual effort?

6. Taking Japan’s economic bubble as an anchor, the lost 30 years is not a long fable but a gradual confirmation of hope being interrupted.

7. Take a step forward; ordinary people will always find new paths. After encountering a large number of samples, one can see diverse paths and many possibilities (Kazuo Inamori: The scene is alive).

8. Recent events are all risks; long-term events are all opportunities. There are two types of mistakes: errors and missed opportunities.

"✅Brutal portraits of different generations"
Post-85: Wealthy, no mortgage, no job
Post-90: Wealthy, mortgage, employed
Post-95: No wealth, mortgage, employed
Post-00: No wealth, no mortgage, no job
People exist in different cycles; your life journey determines the timing of most major life events, and the timing of major decisions in asset allocation is not your choice, but you have to bear the pressure for the next 10-20 years.

"✅The era's proposition"
The common proposition of the current era is that the middle class in both China and the US is living poorly. One side faces deflation, while the other side faces inflation.
The uphill journey is hard; earn one day, enjoy one day; the downhill journey is painful; enjoy one day, earn one day.
Each stage has a corresponding rational narrative that gradually aligns one’s expectations with the reality they are experiencing. No one is truly at the forefront of the times; everyone is being pushed along by the times.
When economic growth suddenly slows down over two or three years, people are more willing to pay a huge premium for this psychological added value (mind, body, and spirit), such as temples and concerts.

"✅Benchmarking Japan"
The lost 30 years is a development that has been continuously interrupted! Constant hope, constant disappointment, year-by-year confirmation.
Once certainty is shattered, how to live becomes a more important proposition.
Ordinary people will always find new paths; find this new path to free yourself from the fate of complaints.

"✅On a macro level"
The scene has its own divinity.
Even if the meso and macro levels are relatively pessimistic, individuals can still see a lot of possibilities and diverse paths.
Talk less with pessimistic people, and seek more energetic youth.
Value question: Do you choose to believe that your future time is more about opportunities or risks?
Recent events are all risks; long-term events may all be opportunities. No matter how you believe, recent risks will not decrease.
But if you are optimistic enough, recent risks are like mosquito bites—annoying but not fatal; if you are pessimistic enough, recent risks will be infinitely magnified, constantly setting limits for yourself, and there will always be more difficulties than solutions.

"✅Dividends"
There are two types of mistakes: one is called an error, and the other is called a missed opportunity.
In investment, mainly avoid errors; in entrepreneurship and certain lifestyles, explore new opportunities, mainly to avoid missing those potentially tenfold or hundredfold dividends.
Dividends: Entering a high-growth trend at the right time and becoming a leading player. Enjoying a period of monopoly-like dividends and obtaining excess returns. Knowing that this won’t last long, enjoying the process while working hard to pedal the bike a little faster. But everything you gain is by no means an inevitable result of personal effort; it’s just that you happened to enter this lane.

"✅US Stocks"
Most US stocks have stable volumes and can raise prices, but cannot support volume growth. Monopoly and incremental growth mostly lead to premiums.
Do you feel that US stocks are about to crash? Yes. It may still reach new highs before A-shares.
US stocks are expensive and often prone to crashes, but they have long-term upward trends.
Capital appreciation is the only scoreboard of society. First, US stocks will definitely rise in the long term; second, under the support of the dollar order, it will unequally bring in the purchasing power of other countries using fluctuating dollars.

"✅Economic Data"
Data caliber: Just ask a few people.
Retrospective adjustments: Change data from several months or even years ago.
No indicator's data is real.
Each can accurately cool down or heat up the market at that time, completely depending on whether the rhythm is more beneficial to the entire system.
The country and society serve capital appreciation; as long as everything is beneficial to capital appreciation, it will happen.
If there is capital that can make a lot of money in a financial market crash, it will cause the crash.

"✅Collective Game"

1. Seek to benefit capital appreciation
   In Western society, capital maximization.
2. Seek to benefit collective recognition
   In Eastern society: the collective believes in a relatively appropriate way.
3. Response
   First, truly seek truth; second, be clear that earning money is about how fake the world is.
   Practice: In this wave of high prices, did anyone get a huge profit opportunity? If so, be alert and hedge; if not, once this wave slightly corrects, or the fundamentals catch up, continue playing the stock game.
   View on US stocks: Monopoly companies; find companies with high growth and increment. Don’t bottom fish the targets that big players want to divide and eat.
4. Mean Reversion
   Truth / consensus has taken effect. But some games are not seeking truth from beginning to end.
   America's biggest tool: the importer of most countries (Party A); asset prices have the highest long-term compound growth and increase, involuntarily putting money here (the world's largest casino).
   The Nikkei 225 has little to do with the Japanese economy because the revenue sources of its main components are highly overseas.

In fact, US stocks also have a similar "twisted reflection"—the correlation with US stocks is likely higher with the growth rate of US Treasury bonds.

US Treasury bonds borrow money from the world in the name of the US (not in the name of US companies), borrowing more and more, with a CAGR of about 7%.

The borrowed money is spent by the government, starting from large companies and distributing profits layer by layer, while the finance provides various expenditures for the entire population.

In the entire ecosystem, enterprises occupy the best ecological niche—

✔️ US Treasury bonds: unrelated to enterprises, as the government borrows money from the world on behalf of Americans.

✔️ Profit distribution: Whether government spending or household consumption, enterprises can always prioritize receiving water.

P.S. The US GDP is mainly driven by consumption.

✔️ Tax revenue: Besides issuing US Treasury bonds, tax revenue is the most important source of income for the US government.

From the image below:

Corporate income tax accounts for only 9.5%, yes, only 9.5%, and the Republican Party may further reduce taxes.

Comparatively, what is the proportion of personal income tax? 49.0%. Yes, as high as 49%.

To summarize the ecological niche of American enterprises:

US Treasury bonds are not borrowed by me, but I can benefit from them. My income source is stable, even showing a subscription-like logic, allowing me to continuously draw water. My tax burden is also very small. Coupled with buybacks and dividends, I can further elevate shareholder returns.

r > g > w, capital return rate > GDP growth rate > wage increase rate

Considering the overseas revenue proportion of the S&P 500, does the index's rise and fall really have a significant relationship with the economy's performance?

I frequently mention and emphasize
✅ Figure 1. because it vividly illustrates the operational logic of this system.

If you are on the side of the common people, you might find this system a bit terrifying; if you are on the side of shareholders, you might find it incredibly wonderful, in line with what Taleb calls "asymmetric risk"—the benefits belong to me, the risks belong to you.

Teacher Zhou Luohua likens the "game beyond the game" to a murmuration of starlings that constantly changes formation, emphasizing that the core algorithm of this game is to ensure the randomness of individual positions.

But in reality, some giant birds can occupy the central position continuously for a period.

This image is just meant to tell everyone: the fewer people who died in the past does not mean it was not tragic, because we must also consider the base issue; the 20th century was the century of global population explosion.

We have become too accustomed to the narrative of peace; when stretched over a hundred years, human slaughter has been continuous, and conflicts have never ceased.

In fact, the "peace narrative" from 1990 to 2020 (Figure 1) is just a special period in the long river of history—

The world pattern is stable, with one superpower and multiple strong nations. Under the wave of globalization, the division of labor is clear, everyone focuses on development, and efficiency takes precedence over fairness.

The superpower, the United States, can use various influences and non-war sanctions to control the outbreak of large-scale hot wars, promoting the globalization of capital and the economy.

Of course, contradictions, small-scale wars, and arms have always been important exports of the United States, and similar products also include: American values, dollars/debt, and staple foods.

But currently, the United States lacks the capability, and perhaps the willingness, to control the outbreak of hot wars anymore.

The hot wars in Ukraine and Israel-Palestine reveal that the era of peace has become a thing of the past; we are now in a new phase of great power competition: a phase of de-globalization, where fairness surpasses efficiency.

✔️ Increment is the biggest fact; without increment, in a world of inflation, per capita resources will relatively decrease. Increment is what all organizations and capital crave.

✔️ The three circles are like three suns, forming an elusive three-body motion—

1. The facts of the objective world, part of which is related to increment.

2. The consensus of the majority, which is the viewpoint and concept of human social activities; it does not necessarily relate to facts.

3. The self (subjectivity) of a minority, the independent consciousness and viewpoint of individuals in society.

The three circles intersect in pairs:

✔️ Without supporting increment facts, the development of things will be chaotic and short-lived, requiring subjective predictions of the next step.

✔️ Without the need for consensus support, the development of things will be strong, stable, and orderly; changes in group viewpoints cannot alter facts and developmental trajectories; fluctuations in consensus do not affect results.

✔️ Individual viewpoints cannot play a role; the development of things will be rapid and fierce, with increment facts and consensus mutually reinforcing, everything obeys evolution, and subjective conjectures are abandoned.

Seek truth from facts, find intersections.

"⭐️ Seek truth from facts"
Short-term focus on the market, mid-term focus on consensus, long-term focus on frameworks and laws.

1. Individualization
   When there is no unified standard, people have their own personalized needs, so everyone’s definitions of various matters differ.
   For massive socialized matters, the stability and randomness of results, almost everyone’s perceived framework standards have been proven.
2. The question of seeking truth:
   ① What is the proportion of natural sciences and sociology?
   Self-seeking truth in natural sciences and the truth of the defined standards in sociology.
   ② Who constitutes the consensus game in this society? What are their defining standards? For how long?
   The spectrum of natural sciences and social consensus: first determine the time length and participants of this matter; if it is long-term, believe in the thinking mode that leans towards natural sciences and laws; if it is short-term and volatile, believe in market price signals; if it is neither long nor short, the consensus of the dominant group and their ideology decides, but one must ask how long it will take to change their minds.
   Long-term is a weighing machine: the group responsible for weighing remains unchanged; the standards of that weighing machine have stabilized for many years; the differences and distinctions of those things on the scale are not that significant.
3. Seek truth from facts
   ① The truth-seeking of natural sciences
   Act according to natural sciences.
   ② The truth-seeking of sociology
   That is the needs of the masses, which may change and need tracking.

"✅ Seek truth from facts - Investment"

1. Be clear about what the truth of natural sciences is?
2. Be clear about what the truth of your subjective framework in sociology is?
3. Be clear about what society considers to be true?
   Find the intersection between your truth-seeking and society’s truth-seeking. Determine the timing of the intersection collision: is it short, medium, or long?
   Long-termism: the timing of the handover is far from you.
   Long cycle: betting on things that are not easy to change.
   Short cycle: find price differences and arbitrage.

"✅ Mid-term - Difficulty in narrative change"
The mid-term is a collection of N short-term trades.

• First, you must be in it;
• Second, don’t forget your definition of trading in your inner market.

It is recommended to learn from Buffett's way of thinking to view trading, the spirit of seeking truth, etc., but it is not recommended to directly replicate his methods in any world outside of US stocks, as the domestic cultural environment is completely different.
The framework of seeking truth in natural sciences + personal preferences has a certain personal tendency, tracking and researching the mid-term changes of things, knowing how much stronger you are than others. If you are not much stronger, it is recommended to invest in ETFs.
"If you misjudge"
Long-term is composed of countless fragments of trades. Each fragment will have a price quote, that is, the signal of market consensus.

• If one or two signals differ greatly from you, it’s fine; if the continuous signal trend direction is completely different or mostly different from you, that’s just fate not taking that intersection, nothing more, just end this round.
  Concentrate but do not disperse: concentrate on things where you have cognitive advantages, understand, excel, and are not conflicted internally; don’t just press one.

Living in society ultimately requires social consensus and ideology. If the external scoreboard and internal scoreboard are always equal, the heart is abundant.

• Subjective people will think it’s their impressive rotating impression wheel; humble people will realize that the wheel can turn thanks to many invisible people and invisible hands helping you turn it, because they need you to turn this impression wheel.

• ✅ Long-term - Extremely high requirements for the market environment" The requirements for the environment are harsh, and whether you are the one who survives in that environment, whether your money is long-term money, and whether your voice and influence are sufficient. If you can find an environment that remains completely unchanged, preferably one where you are the rule-maker, try to consider problems according to the longest cycle, that is, always squatting on unchanging things.

• "✅ Short-term - Improve cognitive aesthetics" Market price mispricing is caused by information gaps/cognitive gaps; patiently wait until the market is severely discounted or in a severe bubble before acting. Only those who accumulate a large sample size can improve their aesthetics and find others’ pricing errors in the short-term market price mechanism signal game, earning others’ money.

• "❤️ What you like to do" Use the time saved by embracing beta to create alpha. If in your life you can find something you genuinely like, have no internal conflict, and have cognitive advantages, concentrating your time, energy, and life on that thing will make you very happy. Few people know what they like in their lifetime. Find the intersection: what do you like to do? What can you do? What does society need you to do?

• "✅ The most terrifying thing" The trading environment has changed, and you are completely unaware. You may still be immersed in your inherent impression of cognitive advantages, concentrating on the right track, and achieving good results after diversifying. But when the environmental disruption comes, the above three points will be shattered.

• Without warning, and it has nothing to do with your efforts, then things will end. You cannot change the environment; learn to improve your own abilities. The rhythm of environmental mutation matches your rhythm, and the positive feedback results obtained will always be nonlinear; conversely, the negative feedback results are also nonlinear.*

• When bottom-fishing is something that will be divided among others, that is not called bottom-fishing; that is called cannon fodder.

Thinking in reverse, starting from the game, if flipping xx will benefit the elite class on Wall Street, then xx is likely to really flip (wonderful)! (Refer to the 08 subprime mortgage crisis, Silicon Valley Bank)

But as long as the environment doesn’t change, after xx flips, capital appreciation will still drive everything. (Refer to the UK stock market) After the game ends, it returns to the right track. So, US stocks are expensive, US stocks may crash, but US stocks can also reach new highs~

Short-term is a voting machine, long-term is a weighing machine—

Essentially, it is a question of each wave of people’s life cycles.

“Medium to long term” is determined by the consensus of the dominant population and their ideology. Here are three assumptions:

• 1. The group responsible for weighing is unchanged; they have persisted for many years.
• 2. The standards of the weighing machine are stable and unchanged.
• 3. The things on the scale have not changed. (Changes in domestic real estate)

Finding pricing errors—

Finding “bargains” in the environment to earn price differences, the core competitiveness of identifying pricing errors lies in “high aesthetics,” the difficulty lies in “high aesthetics” likely emerging from mastering a large sample size. (Munger doesn’t talk to young people about investing because they lack the sample size of economic cycles and cognitive frameworks)

If the environment remains unchanged for a long time, the world will eventually come to you. We can overlay and utilize short-term prices (Mr. Market) that will always give a point that does not require super strong cognitive advantages to discern cheap points, and buy heavily. (Buffett hasn’t made big money for 16 years…)

Concentrate but do not disperse—

Starting from the internal scoreboard, concentrate on things where you have cognitive advantages, understand, excel, and are not conflicted internally (such things cannot be dispersed). Starting from the purpose of obtaining the external scoreboard, fate has countless intersections; to avoid being fooled by randomness, you need to press several directions to avoid being over once.

If you have received negative feedback, it is highly likely that you do not have cognitive advantages or you do not love what you are doing~

If you have received positive feedback, respect society, and remind yourself that this result must have served some needs of society. When the flywheel starts to turn, humble people will see it as a result of many forces working together.

Embrace β, live life with heart—

If you find that you really do not have cognitive advantages, then just participate in β~

Embrace β, give up α, and concentrate more time, energy, and life on what you love after giving up α; that is already very happy! (Finding what you like in your life is very rare.)

Self-importance or always thinking of changing one’s name is not wrong; it’s just that being indifferent to everything around you and neglecting many other happy people in life is truly foolish. (Remind myself repeatedly!!!)

The most terrifying thing is that the environment has changed, and you and I are completely unaware—

When you truly have cognitive advantages, immersed in the concentrated and correct path, the environment has completely changed. You cannot change the environment, but all organisms that cannot adapt quickly will die; those that survive will improve themselves. (Phase transition critical phenomenon)

Unless you are the rule-maker or participant in the environment. (Pelosi ETF)
We are people with limited resources.

Buffett can be learned from, but not copied. (US stocks serve capital; capital appreciation is the only goal; the environment has never changed; A-shares are financing markets, and the socialist orientation is fairness over efficiency; how to identify changes in the A-share environment? For example, the new national nine articles…)

The most important ability in life is to improve one’s expansion ability. (Expand sample cognitive volume, Bayesian algorithm probability optimization)

How to identify environmental mutations? How to adapt to mutations? Adaptation also requires matching rhythms; when matched, positive feedback is nonlinear and huge; when not matched, negative feedback is equally terrifying. (Refer to the 08 subprime mortgage crisis’s bearish ending due to rhythm; refer to this discussion on the real estate market…)

Some golden sentences—

Social resources are limited, but human greed is infinitely inherent.

Things that operate in a socialized structured manner, due to the existence of random events, the framework standards that everyone believes in may have been proven.

That’s just fate not taking that intersection; it’s nothing. People admire the strong but do not like the wise who avoid disaster.

The so-called “anomaly” is a counterintuitive condition parameter or underlying law that contradicts our usual understanding and has a huge impact in the dark.

Nonlinear growth patterns
Non-normal distribution of the financial world⭐️
Non-continuous growth of the real world
Non-independent individuals in cyberspace
Non-ordered development of the law of increasing entropy
Irrational human society

"✅ Investment - Miscellaneous"
There is no so-called crystal ball or dragon-slaying technique in investment; what’s more important is forming a way of thinking and framework to view problems from different angles. That is, an interdisciplinary, diversified thinking model and different knowledge systems.
The Chinese economy is in the process of transitioning from old to new momentum. Entrepreneurs in old momentum, old economy, and traditional manufacturing industries are relatively anxious; entrepreneurs in new consumption and new momentum are relatively positive. The slope of different industries determines the morale of the bosses.
The median age of EMBA students is over 45.

"⭐️ The Investment World - Six Anomalies"

Anomaly: Counterintuitive, contrary to common understanding, and some rules of existence that have not been treated as underlying assumptions in reasoning and judgment.

(1) Nonlinear growth patterns
The valuation model for enterprises is based on past growth to infer future growth over the next three to five years. But in fact, many industries experience nonlinear growth.
For example, the transition of technology takes the same amount of time from 0% to 10% and from 10% to 90%, but after crossing the 10% threshold, explosive growth begins. The speed of technology dissemination/popularity is the same.
The financial market has never been a smooth linear growth; it is characterized by sharp rises and falls. This is because the development of many things in investment and the growth of enterprises are nonlinear.

(2) Non-normal distribution of the financial world⭐️
Power law distribution is more common in this world. The important few and the trivial many, the 80/20 rule.
Power law distribution is the most powerful force in the universe, completely defining the surrounding environment, and we are almost unaware of it.
Wealth = resources + luck + talent + ……
The result of infinite games will increasingly concentrate.
📚 "Capital in the Twenty-First Century" shows that the speed of human capital appreciation exceeds the speed of wage growth. If wealth grows by 5% per year while wage income grows by 2%, then R > G > W. After continuous cycles, the differentiation becomes larger.

• In the financial field
  Time dimension: A few days of significant increases may contribute to the bulk of cumulative gains (the non-linear nature of rises and falls).
  Space dimension: A few companies contribute to most of the market’s rise.
  Response: Most investors lack the ability to find the few best companies, so it’s better to buy indices.
  The financial market is mostly flat most of the time, with only a few moments of lightning strikes.
  Look at the overall trend: long-term in a continuously growing economy.
  Valuation: More effective in the long term. Market valuation is composed of corporate profits, risk-free interest rates/discount rates, and dynamic views of changes in interest rate cycles and profit growth.
  (3) Non-continuous growth of the real world

(4) Non-independent individuals in cyberspace

Everything in the world is interconnected, even mutually causal and influencing each other.

For example, the width of a horse’s backside → the width of Roman chariots → the width of railway tracks → the diameter of rocket boosters → the width of tunnels at rocket launch sites.

The reflexivity theorem discovers mutual causation.

If the world is composed of networks, being in it, how to make good use of this network to play a more important role in information acquisition or influence channels is crucial. For example, forming an expert team to create a strong information chain in investment to support investment decisions.

You must connect with the world and maintain an open mindset. Discover others, recognize others, appreciate others, and enter a positive cycle. Taking the first step is the most important.

(5) The law of increasing entropy in non-ordered development

(6) Irrational human society

"⭐️ Diversified Thinking"
Finding problems requires looking at them from different angles; solving complex problems requires having expertise in various aspects.
(1) Historical thinking
The further back you can see the past, the further you can see the future.
(2) Cyclical thinking⭐️

• Economic cycles: The inventory cycle is somewhat predictable. The Kahn cycle has no clear turning points to predict, and there are no observable indicators to track.
  The judgment difficulty of mid-term and long-term cycles is very high.
• Market cycles: Each cycle is not of the same length, and it is not believed to be predictable. The only ruler that can be relied upon is "valuation," which is related to many factors. Foreign asset management institutions use valuation to predict the risk-return characteristics of assets over 5-7 years.
  The most important thing for economists is to explain economic phenomena, not to predict.
• Debt cycles: Monetary finance is in a downward period, reflected in deleveraging. Any deleveraging must have corresponding subjects to bear it. After the new asset management regulations, China’s financial system has been continuously deleveraging. After the three red lines policy, real estate began to continuously deleverage, which has profound impacts due to high industrial relevance.
• Liquidity cycles: The most leading, possibly driving the short-term economic downturn.
• Individuals: Anyone will maintain a cautious posture. Only optimism can survive. If optimism is taken, it may take three to five years, but you will definitely see a day of relief.
  In a world of uncertainty, it is difficult to make accurate predictions, and one cannot replicate the markets of other countries; policy is very important.

3. Long-termism thinking
   The probability of losing money in the stock market in one day is slightly lower than that of tossing a coin. But over ten years, it is 6% (in the US stock market).
   Long-term is where you can replicate the X-axis to the greatest extent, but the Y-axis (slope) is not determined by whether you can be long-term; however, the Y-axis ultimately determines your results.
   Sustained long-term growth of the country, continuous improvement of comprehensive national strength.

4. Network thinking⭐️
   What rules in this networked world are worth paying attention to and thinking about?
   Structural holes: The most important nodes in the network, solving information asymmetry. Expanding the value of people who occupy nodes with structural holes is greater.
   Scale-free networks: Most ordinary nodes have few links, while most popular nodes have countless links.
   Metcalfe's Law: The value of a product equals the square of the number of users.

5. Psychological thinking

Any external thing is a projection of the inner self.

📚 "Thinking, Fast and Slow"
Fast and intuitive system 1 and slow and rational system 2.
In investment, decisions are often driven by emotional impulses. Clearly, one should think slowly but often adopts a fast-thinking mode for decision-making. Therefore, thinking should be disconnected, focused, and supervised.

📚 "Poor Charlie's Almanack" psychological behavioral biases.
📚 "The Crowd" group psychological biases.

(6) Value thinking
Static value: Focus on the current value of enterprises.
Dynamic value: Focus on the future value of enterprises.
(7) Demand thinking
: "⭐️ Diversified Asset Allocation Framework"

• 1. Value-added function: Focus on equity investment, establishing an asset portfolio. The destiny of capital is to proliferate. Among all assets, only corporate stocks create value, generate income, and profit, thus providing returns (appreciation). Land and forests are the same. From the perspective of appreciation, gold needs to be stored and cannot grow new gold. But it can serve another function, which is as a hedging tool.
• 3. Hedging macro risk function - Inflation: Corporate profits shrink sharply, and stocks become ineffective. Physical assets, inflation-linked bonds, natural resources, commodities, real estate, infrastructure. Due to adjustments and reconstructions in raw material prices, and fees can be adjusted with inflation, thus having the function of hedging inflation. - Deflation: No demand for enterprises, stocks become ineffective. Money itself becomes more valuable, holding high-grade, long-term, non-redeemable government bonds can stabilize cash flow assets to resist deflation. Classic macro policy: In a deflationary environment, interest rates continue to decline because the central bank must respond to economic downturns by loosening monetary policy and releasing liquidity.
• 4. Diversification function: Hedge funds, pure α returns, are largely unrelated to the macroeconomic market. For example, quantitative, event-driven, long-short trading strategies. Yale's endowment fund only does event-driven and short strategies, finding truly effective strategy managers.

• "⭐️ Middle and low net worth groups" In the asset allocation structure of most families in China, real estate accounts for the majority, losing liquidity. Along with expenditures for children's education and family responsibilities, there is very little that can truly be used for long-term investment. It is advisable to place it in ordinary financial products or demand deposits, as there are no alternatives. Wealth accumulation is not enough, and there is a lack of understanding of alternative assets, unable to bear corresponding risks, nor can they withstand the pressure of long-term illiquidity. At the same time, the risk of individual stocks is also very high. For ordinary families, it may not yet be time to make large asset allocations or global allocations. Asset allocation is the most important way to achieve value preservation and appreciation or ensure the purchasing power of assets.

• "✅ Main contradiction - Long, medium, short term"

• 1. Long-term: The initial framework of allocation, such as a 5-7 year or longer term.
• 2. Mid-term: Adjusting proportions based on the initial allocation in the cyclical dimension.
• 3. Short-term: Five-factor model (fundamentals, policy, liquidity/funds, valuation, technical/momentum). When valuation exceeds three or four times the historical average standard deviation, it will definitely play a role. The shorter the term, the more effective the technical indicators are, as they reflect the psychological behavior of countless investors combined. Asset allocation is a combination of science and art; at different times, the dominant forces driving the market are different, and the driving factors are different. The investor's sensitivity and experience to the market are also particularly important (deduction). Induction always plays by common sense, but the market may not play by common sense, so deduction is also very important. So far, human creativity stems from not playing by common sense, from being able to break out of the box, to be more creative.

• "✅ A once-in-a-century major change" The so-called major change, whether in a century or millennium, has its origins. The transformation of macro paradigms:

• 1. The cyclical changes of great power rise and fall
• 2. The turning point of global wealth distribution: efficiency → fairness. The fourth turning point from wealth accumulation to wealth distribution. Historians believe that the concentration of wealth is naturally inevitable, but it must be alleviated periodically through redistribution. They view the entire economic history as the heartbeat of a social organism, with the concentration and redistribution of wealth being its contraction and expansion.
• 3. The transformation of monetary and financial cycles. The unprecedented expansion and contraction of monetary and financial cycles.
• 4. Population
• 5. The reconstruction of the global industrial value chain. The transfer of some production capacity from China, the replication and localization of industries in developed countries, and the increasing emphasis on safety.
• 6. The energy cycle and energy transition. The third energy transition, where new energy has achieved leapfrog growth in this stage.
• 7. A new starting point for technological innovation cycles
• 8. Digitalization. The transformation of digitalization is more influential, more comprehensive, and more disruptive, becoming a new economic factor.
     "⭐️ Responding to narratives" Human history is composed of stories. Group psychology: more likely to believe simple, intuitive, and emotional stories; individual clarity may not necessarily lead to a good life. A more rational and clear view of these narratives.

The previous round of efficiency → fairness cycle, from the 20s and 30s to 1980.
The previous round of fairness → efficiency cycle, from 1980 to 2022.
Currently, it is the efficiency cycle → fairness cycle.
The efficiency cycle has reached its peak: fairness has reached an extremely unfair level, and the wealth gap has reached its peak.
📚 "On Imperialism" Lenin: Imperialism is the highest stage of capitalism. Capitalism, with the development of productive forces, corrupts to the highest stage, which is monopoly capital; when monopoly capital combines with state machinery, it becomes imperialism. Imperialism's eastward and westward expeditions are to maintain monopoly and protect monopoly profits.
Now, such strong anti-monopoly leads to involution.
The most typical market state is a perfectly competitive market. That is, labor earns meager wages, capital earns standard interest; any debt means all operations are working for the bank. The path to this state is called involution. If it deviates, it will enter monopoly. Maintaining the status quo is impossible; if you don’t take this path, you must take another path.
The intermediate state: destructive innovation, continuous innovation, continuous destruction, but cannot be maintained forever.

"✅ Study History"
The gap between theory and reality: reality is extremely complex, composed of countless forces. Any theory must be simplified.
Using the two-body problem method, study with cyclical thinking. Observe what kind of forces are pulling back and forth.
All cycles and spirals can essentially be viewed as dual phenomena or variants of dual phenomena; the key is how to select these two variables.
Society must be simplified to a certain extent.
Newtonian mechanics: derived from Kepler and Galileo's observations of celestial motion, celestial bodies are very sparse, without such a complex force structure, presenting a simple model. Only by abstracting it can Newtonian mechanics be derived.
Reading: First read the book thin, then read it thick.
Research paradigm: Don’t think of it as a straight line; don’t think it’s completely impossible to study. If cycles exist, what forces are leading?

"✅ Fairness Cycle" The stock market return rate refers to the US stock market from the 1930s to the 1980s. From the 1980s to now, it is historically very special, without major wars, each contributing to globalization.

• 1. Grasp: The yield of the US ten-year Treasury bond. When doing research on complex matters, it is best to start from the simple. The yield of the US ten-year Treasury bond is a particularly good grasp for observing long cycles, while also containing policy will and market forces. Because the US is the global financial center,
• After peaking in 1981, there was a long-term decline in interest rates for 40 years, which indirectly pushed up the prices of all assets, leading to a general increase in asset prices worldwide. Any phenomenon of compound interest cannot be perpetual. Throughout the fairness cycle, don’t expect to make big money through the stock market. From the peak in 1929 to the end of 1980, the US stock market rose 4.6 times, with an annualized return of 2.9%.
• 2. Independence of XX. Starting in the 1980s, the economic consensus was that XX should have its own independence. The financial market is dominated by the endogenous forces of Wall Street or the capital market, while monetary policy only plays a supporting or corrective role. Now, the US financial market is built on the operations of the Federal Reserve, and the US economic cycle has become an endogenous variable of US monetary policy, with interest rate hikes leading to unemployment and rate cuts leading to bubbles. The original cycle cannot continue, and the process of seeking solutions reflects the fairness cycle. The fundamental problem of the economy is that the market cannot sustain expansion, purchasing power is insufficient, and consumption capacity is uneven. The efficiency and fairness cycles are also peaks and troughs of wealth moving from concentration to redistribution.
     "✅ Involution Era" The characteristics of the monopoly capital stage are capital killing capital. The vast majority of entrepreneurs in the entire industry are losing money, and they must hate those peers who can drag them into industry losses. Growth - supply and demand: typical scientific progress can truly innovate, and the market must have purchasing power recognition and affordability. Wealth concentration affects increment and purchasing power. The marginal propensity to consume decreases is human nature, reflected in society as varying consumption tendencies; the wealthier people are, the lower their consumption tendency. The continuous cycle leads to the poor having no money to spend, while the rich do not need to spend (no extra consumption), like an endless pit.
     "⭐️ Cycle Turn" Once a turn begins, it spans a generation. Change: The yield of 10Y Treasury bonds. It better reflects the supply and demand situation in the middle and long-term changes. The competition between China and the US is a 5-10 year cycle, smaller than the cycles of fairness and efficiency. If US stocks fall next year, the Federal Reserve will definitely cut interest rates, but there are doubts about whether even rate cuts can save it. In the cycles of fairness and efficiency, the US faces the issue of necessary expenditures, and welfare expenditures will increasingly grow. The truly impactful factor on the real economy is the yield of ten-year Treasury bonds. Different dimensions have different concerns; regulatory agencies look at the long term, but traders are more concerned about the short term, focusing on the Federal Reserve's interest rate hike or cut statements, determined by the bonus cycle.
     "⭐️ Ask Yourself" You can only ask yourself; never think about young people or others, or everyone. First, do not assume that everyone’s decision-making function is the same as yours; you cannot even assume that your decision-making function is a single variable. Chicken soup: The changes of the times are not your fault; as long as you endure long enough, everything is cyclical. The underlying is a social contract; the contracts signed by the times and each generation are different.
     "⭐️ Learning Habits" Regularly think; research habits should match research purposes. Fragmented records should be recorded in voice form, weekly journals (about 200-300 words), and annual summaries (over ten thousand words), based on which a ten-year summary can be made. Information sources: Bloomberg, Financial Times, Wall Street Journal, Economic X People. Look at financial conditions through the ads placed. Demystify overseas media; they really do not understand China. Recommendation: Watch strong media.
     "⭐️ Real Estate & Deflation" The times are the examiners, and we are the respondents. The exam paper given to each person is different. The short-term pressure on housing is relatively large, but the long-term outlook is optimistic, but do not expect to make big money. The central bank has repeatedly called for not to keep the yield too low, as the actual growth rate is bound to decline. The key is not to set future inflation expectations too low. China has a tendency to inflation, with a large number of state-owned enterprises and labor-intensive industries, which transmit faster; when the entire economy decides to inflate, efficiency is far higher than that of the US. Just don’t think that China will always be deflationary, as many value scales occur at the level of public opinion. The actual growth rate is bound to decline, but nominal interest rates are the actual growth rate + inflation; inflation is very likely to rise again, at which point some anti-inflation assets will be needed.
     "⭐️ Immigration" Population issues, short-term variables are related to the economy. Long-term variables, from a geographical perspective, look for livable environments, certain natural resources, and geographical importance. We are currently in the process of transitioning from the old world to the new world. The new world includes sub-Saharan Africa, Australia, and North and South America, which are vast and sparsely populated. The long-term prospects of the Chinese economy may exceed that of the US in total, but it is impossible to exceed that of the US per capita because there are too many people. The middle class or upper middle class is the real basic group for immigration. The vast majority of immigrants in the US are chain immigrants (low-end immigrants). Recommendation: Live for half a year before making a decision.

Discussing Bank Stocks and Survival Principles in the Fairness Cycle -#

It’s time for Teacher Chang to return. He is the author of "Civilized Capital and Investment" and "Buying Bank Stocks," and was a guest in the 31st episode of our meeting. Recently, I went to Shanghai and chatted with Teacher Ding about the original intention of writing the book on bank stocks, as well as the shift from efficiency to fairness cycles and investment in this context, and whether we should consider immigration. Welcome everyone to listen to this episode.

01:00
Since we last recorded, you should have received a lot of positive feedback; it’s not really positive feedback, but there should be some good results. I actually had a sentence from the last recording that I’ve been hesitant to say because it felt impolite to say it the first time we met. To be honest, I was a bit worried about your book on banks. I don’t know if you play with Xueqiu much; I’m particularly afraid you might fall into that initial curse, you’ve probably heard of it, which is to be explicitly bound to a certain type of asset because prices will definitely fluctuate, and such books can easily become evidence in the future, you know? So, for example, because of the phase decline in the prices of such assets, it might consume your personal credibility. Are you worried about that?

01:35
To be honest, I hadn’t realized this issue before because I don’t really play with Xueqiu or Dongfang Wealth; I know they exist, but I’ve never looked at them. But what you just said is great: it should become evidence in the future. That’s exactly why I wanted to write this book and use such a name to make it become future evidence.

01:53
I’ve talked about this with quite a few people, and they say, “How much has the bank bought for me? Is there any return?” In fact, I want to say that the bets I place on any stock are not as significant as the bets I place on this book. In other words, this book will become my largest source of returns in the future. I’m not referring to royalties or financial or monetary returns. This is, to put it grandly, the return on the value of my life. So I specifically want to use a book format; it’s actually a way to break out. In fact, in my book on buying bank stocks, our topic in Chinese is called "Buying Bank Stocks."

02:30
You see, in English, it’s called "buy and hold bank stocks." There’s a clear statement in my book that buying and holding bank stocks is not stock trading. So those who trade stocks are not on the same path as me. Therefore, I don’t want you to regard buying bank stocks as a way to trade stocks. Including what you said about the recent short-term fluctuations, just as our bank stocks have adjusted at the end of summer. But if you look at August, the rise was also abnormal, and the decline was also abnormal; it’s clear that a batch of funds came in, and this batch of funds might just be speculative funds, and for them, it’s a good time to take profits.

03:08
The stock market is an open market; anyone can come and play. If I’m being selfish, I don’t want them to come. I hope that this playground is filled with people who buy and hold for the long term, willing to accept a 5% or 6% dividend rate; only then can you enter. If you want to go out in the future, it’s understandable if the valuation reaches above 1PB, 1.2PB; this will lead to a very smooth trend. We use a concept called the Sharpe ratio, which is the return divided by its volatility; my Sharpe ratio will be very high.

03:40
In simple terms, my holding experience will be very good. Those who come in will spoil my holding experience. Because if you rise by 10%, I won’t sell. If you rise by 10% and then fall by 10%, this only increases volatility; of course, it has no impact on me.

03:56
For some who may have a long-term affinity but are not firm enough, they may be washed out or suffer some losses; that’s another matter. So overall, I’m not worried about how others think. On the contrary, I’m willing to take another path, and I ultimately want to prove that this path is feasible; I want it to become my evidence.

04:20
But we say that no strategy can cross the entire cycle; the prices of such assets fluctuate. Of course, I estimate that you won’t receive too much similar feedback. In fact, I don’t want to describe bank stocks as something that can transcend cycles or as a long-term, or we say snowballing development. In fact, we can see that the rise of bank stocks over the past year has mainly been driven by valuation increases; their performance has actually slightly declined. The day before yesterday, I looked at that chart, and the contributions of EPS valuation repurchase and dividends were shown for various industries. Then I saw that the banking industry, including coal, had a decline in EPS, but the valuation increased significantly. So I don’t want to describe it as the kind of transaction Buffett made when he bought Coca-Cola in the 1980s. That kind of sustained increase due to a very high endogenous ROE is not the case.

05:13
Bank stocks are a typical valuation repair; it’s just that the extent of this valuation repair is very large. Now it may be at 0.6PB; I believe below 1PB is definitely undervalued, 1.0 to 1.2 may be a reasonable range, and above 1.2 may be a bit overvalued; that’s how it is. So there’s about a 50% to 100% valuation repair; I think this repair space is large enough, and its absolute size is very large. If you calculate in terms of amount, that’s a scale of 10 trillion or up to 15 trillion. To be honest, its logic is very complex; I believe the market cannot digest this logic in the short term. In this case, I have a very strong sense of intellectual superiority, you know? If I’m in a boom cycle, like new energy photovoltaics, I see deeper than everyone else. I have more understanding of the management and more understanding of the technical routes; I can do it. But this so-called awareness leading is short for a few weeks and long for three months, and it will definitely be caught up by everyone.

06:14
Where is your strength? The technical route I can make a PPT to talk about for about two hours; what route does the chairman have? Can you tell me about the future plan for internationalization? That’s about it. But bank stocks are not like that; even if I sincerely published a book, I sincerely wrote articles, and I keep promoting it. First, they don’t understand; second, even if they listen, they don’t believe it. So I need to take 2 to 3 years to prove that I am right. To some extent, not understanding or believing is also a particularly good thing. I’m very happy about that. So first, I don’t want to disturb the funds that originally existed; those who are trading stocks, I actually wrote in that book, saying that I hope you continue to trade stocks. In fact, there are still relatively few stockholders in China, right?

07:02
There may be tens of millions or 100 million active stockholders, while the other tens of billions of people do not trade stocks. What problem can I solve for this part? If you originally did bank wealth management, did trusts, and took a relatively high return steadily. Now, the first customized reform, except for the nearly 50% demand deposit that is truly risk-free, you have to bear certain risks for everything else, logical risks. This creates a spectrum of high-risk returns, high returns, high risks, and slightly higher returns, medium risks, and medium returns.

07:32
If you are willing to move along this spectrum a bit, then bank stocks or high dividends, or the so-called central state-owned assets become a very good target. Here you can get relatively high returns, and the risks you bear are not as large as typical stock funds. Usually, if you trade long, you can earn 10% in a month, or even 10% in a week, and then drop 20%. If you often buy and hold these central state-owned high-dividend stocks, the final volatility is not that large. Its Sharpe ratio and holding experience will be very good. This is the choice I provide for them. So whether I write a book or my entire public account, I am targeting a broader readership.

08:15
For those who trade stocks, I actually have suggestions. I suggest that they can take some funds outside of their stock trading funds. For example, if your family assets are 1 million, of which 200,000 is for stock trading, the other 800,000 is for other wealth management or whatever. From the original 200,000, you can take out 50,000, and from the other 80% of the indirect allocation, you can take out 200,000 or 250,000 to make 300,000. In this part, you put it in the stock account, buy bank stocks, buy large central state-owned stocks. Then you don’t need to trade; it won’t affect the part where you trade stocks; your stock trading funds continue to trade. So your focus is not on trading but on holding; you are waiting for the realization of that dividend rate for each year.

08:56
So I started by saying that I think bank stocks for the post-80s are not considered stock trading. Why do I still say I hope everyone continues to trade? In fact, the rapid development of the Chinese economy has factors of diligence and wisdom from our entire populace; there are actually three groups that make extra contributions, jokingly speaking, but that’s the case. The first group is smokers, the tax base from smoking. The second group is lottery players, the tax on the poor; the third is stockholders. So the premise is that if you voluntarily trade stocks, it is actually beneficial to society as a whole, and things that are beneficial to society indirectly benefit me, so I don’t want to influence them. Understand that chives are state-owned assets; whether bank stocks or dividend strategies, what do you think are the sufficient and necessary conditions for it to be effective? I think this is precisely the topic that we may start discussing in the 2025 market.

Notes (part):
✨ How to view the investment logic of bank stocks and the differences from Buffett's investment in Coca-Cola?
The investment logic of bank stocks mainly revolves around valuation repair, which has a significant increase, with a valuation repair space of about 50% to 100%, and an absolute scale that is huge. Bank stocks are not like Buffett's purchase of Coca-Cola in the 1980s, where the continuous rise was due to high endogenous ROE; rather, it is a typical valuation repair process, and the market may find it difficult to digest this logic in the short term.

✨ What advice do you have for investors who wish to buy and hold bank stocks?
I hope that investors who are willing to accept a 5% to 6% dividend rate, hold for the long term, and expect to sell when bank stock valuations reach above 1PB can come in; this kind of trend will be very smooth, and the Sharpe ratio will also be relatively high. As for those who are not firm enough and may be washed out or suffer losses, I am not worried because I want to prove that buying and holding bank stocks is a feasible investment approach that can bring good experiences.

✨ What advice do you have for different investor groups?
For stockholders, I suggest that they can allocate a portion of funds outside of their stock trading funds to buy bank stocks or other high-dividend, low-risk central state-owned stocks; this way, they can achieve relatively high returns while reducing volatility risks and improving holding experiences. As for stock trading funds, continue trading, but the focus should be on long-term holding, waiting for the realization of the dividend rate.

✨ What are the effective and necessary conditions for investing in bank stocks?
The effectiveness of investing in bank stocks lies in their long-term willingness to pay dividends and stable cash flow; dividends are real and sustainable, reflecting the status of the company's free cash flow. Necessary conditions include safety, security, and genuine willingness to pay dividends. As investors delve deeper into the investment logic of bank stocks, they will gradually understand factors such as business models and major shareholder intentions, thus better grasping investment opportunities in bank stocks.

✨ Investment opportunities can be divided into several levels; what are their characteristics?
Investment opportunities can be divided into three levels.
The first category is the most basic, which is to discover good stocks or good industries, potentially shaping the careers of researchers or fund managers.
The second category is opportunities at the level of institutional design, such as restructuring stocks, targeted placements, etc., which can create a batch of institutions or even business segments.
The third category is significant reforms at the level of social livelihood and the real economy, such as the reform of stock ownership segregation, which involves the transfer of government power and has far-reaching impacts.

✨ What is the relationship between the current economic cycle and monetary policy?
The current economic cycle in the US has become an endogenous variable of monetary policy rather than an exogenous variable. This means that the Federal Reserve's operations have a direct impact on the economic cycle, and decisions on interest rate hikes or cuts involve more political considerations than technical bureaucratic levels. Trump's view that the president should intervene in the Federal Reserve's monetary policy is based on this 40-year cycle change.

✨ Can the Federal Reserve's interest rate cuts effectively respond to market fluctuations and stabilize the financial market?
The Federal Reserve may be able to save the market through interest rate cuts, especially against the backdrop of increasing competition between China and the US. However, the effectiveness of rate cuts is uncertain, especially considering the increasing pressure from government welfare expenditures and the interest payment pressure brought about by debt financing. In the long run, the yield of ten-year Treasury bonds is more reflective of the fundamental changes in the economy and the real economy.
How do you manage and handle a large amount of fragmented knowledge?
Initially, I used diaries or review methods to record my thoughts, but due to the overwhelming amount of information, it became difficult to summarize over long time spans, so I switched to voice recording, organizing weekly journals, keeping them within 200-300 words, and conducting annual and ten-year summaries.

✨ How do you view the coverage and understanding of Chinese issues by The Economist and other media?
Although The Economist maintains a high standard and independence, it indeed lacks depth in understanding and interpreting Chinese society. Its viewpoints are sometimes not intentionally blackening China but are limited by cultural differences in recognizing its complexities, especially when facing difficulties in interviewing high-level officials. Therefore, it is advisable for readers to rationally consider the level and authenticity of media information and not to have overly high expectations for their knowledge depth that exceeds their actual capabilities.

"Capital in the Twenty-First Century" outlines the fairness and efficiency cycles through the income proportions of different groups in the US:

I have also found some updated data to better feel the fairness and efficiency cycles:
Data source: World inequality database

Red line: Top 10% of the population

Blue line: Bottom 50% of the population

For example, "I think bank stocks should be worth 1PB," without hearing good arguments, is mostly based on impulse. It is estimated that the narrative model based on the historical cycle cannot provide a proper valuation.

2. "The recent decline in bank stocks is due to the speculative investors who recently entered the market leaving," is clearly a subjective assumption and tends to oversimplify the differentiation of investor attributes, failing to recognize the complexity of investors in reality. The leading bank stocks are experiencing a volume decline, and you cannot determine whether speculative funds or investment funds are leaving.

3. The core theme, the eternal narrative of the relationship between fairness and efficiency, is too simplistic for investment; a cycle is equivalent to half a lifetime, and being right is of no use.

4. The historical stage that emphasizes fairness has a mysterious relationship with bank stocks, which has not been clearly articulated. The underlying logical reasoning may have a certain degree of wishful thinking.

5. Looking at our per capita GDP, can we confirm that we have entered an era that emphasizes fairness?

6. Considering alternatives, why not buy bonds? In fact, from a long historical perspective, real estate is also quite good.

Middle age is a journey from pain to meaning (looking inward).

If you are not content with mediocrity, this is a life operation guide for you#

• Paul Graham, July 13, 2023

• 8998

• 129

Paul Graham, born in 1964, is a renowned venture capitalist in the United States. In 2005, he co-founded the famous startup investment company Y Combinator, investing in over two thousand startups, including Airbnb and Reddit. As the company became a well-known American startup incubator, Graham also earned the title of the Godfather of Silicon Valley.

What insights does this veteran entrepreneur, who simultaneously earned a PhD in applied sciences from Harvard while studying painting at the Rhode Island School of Design, have about "how to achieve greatness"?

If we were to gather the qualities that lead to great achievements in any field, what shape would they take?

Fortunately, this Silicon Valley godfather has slowly sketched the silhouettes of these qualities, and his method of drawing is devoid of any urgency or anxiety. Instead, as he gradually understands what it takes to achieve greatness, his words flow like the cool stream that runs into the summer heat, bringing tranquility and introspection.

This is a recipe for the ambitious, and perhaps it can also become a new beginning for your knowledge and action.

With knowledge and action, Luoran

Original: How to Do Great Work
Author: Paul Graham

If we were to summarize the skills needed to achieve greatness in any field, what common points would they have? I decided to seek the answer to this question through practice.

I initially intended to create a guide for action that could be used in any field. However, I was also curious about what these skills leading to great achievements are. Thus, while writing this guide, I discovered that this list of skills has definite answers, and they cannot simply be summarized by the word "effort."

The following guide is for the ambitious.

Deciding What to Do#

The first step is to decide what the great thing specifically is. This great thing needs to have the following three characteristics: you have talent in this area, you have a strong interest in it, and you have space to showcase your talents.

In real life, you basically don’t need to worry about the third point; ambitious people are already conservative enough in their choice of platforms. So what you mainly need to consider is your talent and interest.

These two things sound simple but are hard to find. When you are young, you don’t know what you are good at, what others are doing, and some things you will eventually do may not even exist now. So even if some people know what they want to do at 14, most people need to keep searching for their goals.

And the method to find goals is to practice. If you don’t know where to start practicing, just take a guess. More importantly, get moving. You may occasionally guess the wrong direction, but that’s okay. Understanding different things is always good; some of the most significant discoveries come from linking different fields.

Cultivate the habit of creating your personal projects. In simple terms, find what you want to do. Don’t let others dictate your definition of "work" or "career." If one day you achieve great success, it’s likely that you did it through your own project. Although it may belong to a larger enterprise, you are the core driving force behind that part of the achievement.

So what can become your personal project? The answer is anything that excites you. As you age and your aesthetic judgment evolves, the things that excite you and the things that matter will gradually intersect. Building a huge Lego model at 7 excited you, self-learning calculus at 14 excited you, and focusing on unresolved physics problems at 21 excited you. These things will change, but what remains unchanged is that genuine feeling of excitement.

The curiosity derived from this excitement is both the engine of great achievements and its rudder. It not only provides you with motivation but also points you in the right direction. When you listen carefully, you can hear what is calling you.

What is the thing that you cannot suppress your curiosity about, even if others find it boring? That is the great thing you should pursue.

Once you discover something you are very curious about, the next step is to learn enough knowledge to take you to the top of the industry. Knowledge accumulates slowly; perhaps from a distance, the knowledge you possess fills out a perfect arc, but when you learn enough to observe closely, you will find the gaps in between.

So the next step is to observe these gaps. This will require some skills, as our brains tend to ignore these gaps and deceive ourselves into building a simpler cognitive model of the world. However, many discoveries arise from asking what others take for granted.

If the answers you get seem strange, that’s even better. Great things always carry the label of being unconventional. Whether in mathematics or art, we can find this characteristic. If this uniqueness does indeed appear, I suggest you embrace it rather than try to change it.

Dare to pursue unconventional ideas, even if others are not interested in the topic. In fact, their lack of interest is a better signal. If you care about a problem that others overlook, and your expertise is sufficient to trust your judgment, then this is your best choice.

To summarize, finding your personal project involves four steps: choose a field, learn enough to reach the forefront, discover gaps, and explore promising areas within them. This is what all those who achieve greatness do, transitioning from creators to practitioners.

The second and fourth steps require you to invest a lot of time and energy. Indeed, our efforts do not guarantee greatness, but from extensive experience, not putting in effort certainly leads to failure. The premise for continuous investment is your own interest. Interest and curiosity will drive you forward more than maintaining a diligent habit.

Curiosity, joy, and the desire to achieve greatness are the three most powerful sources of motivation. Sometimes, these three will gradually converge, and the strongest driving force comes from the combination of all three.

The ultimate prize is finding that branch that may grow out of the gap. You discover the cracks in the surface of knowledge, break them open, and then gain insight into a whole new world.

Let’s talk again about the complex topic of "finding personal projects" and how to find what you want to do. The difficulty lies in the fact that unless you truly engage in it, you cannot judge what these things are like. This means you may need to work in a certain industry for several years to know whether you truly love and excel at it. At the same time, you may not have the opportunity to experience or learn most other industries simultaneously. The worst-case scenario is that you start your true endeavors a bit late due to incomplete information.

The essence of ambition exacerbates this problem. There are two types of ambition: one that exists before you find your point of interest, and the other that arises from your interests. Most people who achieve greatness combine these two forms of ambition. If you are very ambitious before finding your point of interest, you will often find it harder to discover what you truly want to do.

Most educational systems in various countries package "finding what you want to do" as a simple task. They expect you to invest long-term in a field before knowing what you truly like. The result is that an ambitious person is often treated as a disruptor by the education system.

They are unwilling to admit that the existing education system cannot help you find what you want to do, and this system assumes that you can magically guess your future career during your teenage years. Since they are unwilling to admit it, let me state the truth: on this path of exploration, you can only rely on yourself. Some lucky people can guess correctly at once, but the rest will stumble along many paths, researching repeatedly.

So what should you do when you are young and ambitious but don’t know where to start? First, you should not go with the flow, thinking that the answer will fall from the sky; you need to take action. There is no manual that can unravel everything for you; I believe you should have realized this when reading the autobiographies of great people. Luck plays a significant role in finding the career you want to explore. Those great individuals often stumble upon good fortune or good books, leading to a flash of inspiration, discovering the great work they want to do. Therefore, what you need to do is increase your chances of being favored by luck. The way to increase this is to maintain curiosity. Try more things, meet more people, read more books, and ask more questions.

When you have doubts, optimize everything around your interests. A field will gradually change as you understand it better. For example, the things that are truly being researched in mathematics are far removed from what you learned in high school math classes, so you need to understand these things more comprehensively from different angles and levels. However, you should note that if a field does not become increasingly interesting as you delve deeper, then you should stop; that is not what you should pursue.

Do not worry whether your point of interest is different from others. The more unique your taste, the better. Unique tastes are often intense, and this intensity means you will be more productive. At the same time, you are more likely to discover new things in territories that fewer people have explored.

A true sign that you have found something suitable for you is that you even find things that seem complex and daunting to others to be quite lovely.

However, fields are not like humans; you do not need to remain loyal to them. If you discover something that excites you more during your exploration, do not be afraid to change.

If you are providing something for others, first confirm that what you provide is indeed what they need. The best way to do this is to create something you would want yourself, write stories you would want to read, and build tools you would want to use. At the same time, since the people around you likely have similar demands, they will become your first audience.

Providing something for others also needs to follow the principle of interest. It is clear that the stories that people want to read the most are the stories you want to read. I repeatedly emphasize this point because many people think about this matter incorrectly. They do not do what they want but instead