leaf

I have created the above image, outlining the vulnerabilities of families, divided into several major parts:

1. Family financial responsibilities
2. Significant losses of 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 in the image, giving everyone a rundown (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 is depleted - Family financial responsibilities, parents' retirement

✔️ Previous investment in P2P resulted in loss of savings - Significant loss of 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 sighed: How could it be so precise! How could it be 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 converge, coupled with everyone's previous optimistic expectations and obsession with optimal solutions, which is not unreasonable.

Finally, in accordance with the order of the accompanying images, let's discuss 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. Significant losses of family wealth - Lower expectations for investment returns. Aim for reasonable returns, higher Sharpe ratios, and lower volatility; combining these leads to a reasonable allocation 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 towards a high savings rate, maintain an optimistic mindset, prepare for the future, and actively explore income possibilities.

4. Family debt management - Manage the amount and duration of debt well.

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

In fact, personal struggle must consider historical processes... as well as international and domestic economic cycles. What is fate? The years marked with 🏠 indicate a surge in housing prices, those with 🐂 indicate a stock bull market, and those 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 were still entrepreneurial options by the time they reached middle age.

For those born after 95, what options are there? The primary market is almost gone, and they can only create accounts or sell insurance.

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

6. Speaking of value, the term "middle class" implies:

We are responsible for our own assets, working to the best of our ability while reducing immediate consumption, thus sacrificing some current pleasures 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 rhythm, which is highly inertial.

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

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

8. I don't know how to describe my doubts and discomfort with this set of beliefs; I can only provide examples to illustrate:

For instance, the must-read book in our field that people love to recommend, "Rich Dad Poor Dad," features the poor dad as a typical middle-class figure, a university professor who views his house as his greatest asset and is always anxious about salary, 401K, healthcare, vacations, and benefits. He loves the idea of tenure, even though securing that position is quite difficult, as tenure represents the stability most cherished by the middle class.

Sounds good, right? No!

This person, who could be considered a perfect father figure among our parents from the 60s, is exactly the character despised by this book—a rigid, conservative, shortsighted, 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 applies in different environments.

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

All I can say is that no beating is in vain; many things have profound fairness.

11. Is the middle class merely an illusion of systemic mobility? Or is it the inevitable result 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 economic or social output g > the growth rate of worker income w

This structure represents the order of profit for all social classes.

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

13. I’m sorry, but I can’t provide answers either; however, I have indeed started reading 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 the midst of it.

3. Don’t let tomorrow’s rain dampen today’s spirit.

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 mobility? Or is it the inevitable result 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 always have new paths. After encountering a large number of samples, one can see diverse paths and numerous possibilities (Kazuo Inamori: The field is alive).

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

"✅ Rough portraits of different generations"
Post-85: Wealthy, no mortgage, no job
Post-90: Wealthy, mortgage, employed
Post-95: No money, mortgage, employed
Post-00: No money, 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 to 20 years.

"✅ The era's proposition"
The common proposition of the current era is that the middle class in both China and the United States is not living well. One side faces deflation, while the other faces inflation.
The uphill struggle is hard; earn a little joy each day; the downhill struggle is painful; enjoy a day while earning a day.
Every stage has a corresponding rational narrative that gradually aligns one's expectations with the reality being endured. 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 confirmed year by year.
Once certainty is shattered, how to live becomes a more important proposition.
Ordinary people always have new paths; find this new path and free yourself from the complaints of fate.

"✅ Macroscopic level"
The field has its divinity.
Even if the mesoscopic and macroscopic views are relatively pessimistic, individuals can still see a lot of possibilities and diverse paths.
Talk less with pessimistic people; seek out 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 ones 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 limiting yourself, and there will always be more difficulties than solutions.

"✅ Dividends"
There are two types of mistakes: one is called error, and the other is called missed opportunity.
In investment, mainly avoid errors; in entrepreneurship and certain lifestyles, explore new opportunities, mainly do not miss those potentially tenfold or hundredfold dividends.
Dividends: Entering a rapidly growing trend at the right time and becoming a leading player. Enjoying a period of monopoly-like dividends and gaining excess returns. Knowing that this won't last long, but enjoying the process and striving to pedal the bike a little faster. However, everything you gain is not necessarily due to personal effort; it is just that you happened to enter this lane.

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

"✅ Economic data"
Data criteria: Just ask a few people.
Retrospective adjustments: Changing data from several months or even years ago.
No indicator's data is real.
Each can accurately cool or warm the market at that time, completely depending on whether the current rhythm is more beneficial to the entire system.
The state 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 benefits for capital appreciation
   In Western society, capital maximization.

2. Seek collective recognition
   In Eastern society: the collective believes in a relatively appropriate way.

3. Response
   First, truly seek the truth; second, clearly earn money by asking how fake the world is.
   Practice: In this wave of expensive processes, has anyone gained a huge profit opportunity? If so, be alert and hedge; if not, once this wave slightly corrects, or the fundamentals catch up, continue to play the stock game.
   Regarding U.S. stocks: monopolistic companies; find companies with high growth and incremental potential. Don't bottom fish for targets that big shots want to divide.

4. Mean reversion
   Truth or consensus has taken effect. But some games are not seeking truth from beginning to end.
   America's biggest tool: the importer of most countries (the first party); 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 main component stocks have a high proportion of overseas revenue.

In fact, U.S. stocks also have a similar "twisted reflection"—the one with a higher correlation to U.S. stocks is the growth rate of U.S. Treasury bonds.

U.S. Treasury bonds borrow money from the world in the name of the U.S. (not in the name of U.S. 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 treasury provides various expenditures for the public.

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

✔️ U.S. Treasury bonds: unrelated to enterprises; that is money borrowed by the government on behalf of Americans from the world.

✔️ Profit distribution: whether government spending or household consumption, enterprises can always be the first to receive water.

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

✔️ Tax revenue: besides issuing U.S. Treasury bonds, tax revenue is the most important source of income for the U.S. government.

From the image below:

Corporate income tax accounts for only 9.5%, yes, only 9.5%, and the Republicans may further cut taxes when they come to power.

Comparatively, how much does personal income tax account for? 49.0%. Yes, as high as 49%.

To summarize the ecological niche of American enterprises:

U.S. Treasury bonds are not borrowed by me, but I can benefit from them. My income source is stable, even showing a logic similar to a "subscription model," allowing me to continuously draw water. My tax burden is also very low. Coupled with buybacks and dividends, I can further enhance shareholder returns.

r > g > w, capital return rate > GDP growth rate > wage growth 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 like to mention and frequently refer to
✅ Image 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 sky" to a murmuration of starlings that constantly change 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 for a period.

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

We have become too accustomed to narratives of peace; when viewed over a time span of hundreds of years, human slaughter has been continuous, and conflicts have never ceased.

In fact, the "peace narrative" of the 30 years from 1990 to 2020 (Image 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 is focused on development, prioritizing efficiency over fairness.

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

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

But currently, the U.S. lacks the capability and possibly the willingness to control the outbreak of hot wars.

The hot wars in Ukraine and between Israel and 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: the phase of de-globalization, where fairness surpasses efficiency.

✔️ Increment is the greatest 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 may not necessarily relate to facts.

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

The intersections of the three circles:

✔️ Without supporting incremental facts, the development of things will be chaotic and short-lived, requiring subjective predictions for 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 outcomes.

✔️ Individual viewpoints cannot play a role; the development of things is rapid and fierce, with incremental facts and consensus mutually reinforcing, yielding to evolution and abandoning subjective conjectures.

Seek truth from facts, find intersections.

"⭐️ Seek truth from facts"
Focus on the market in the short term, consensus in the medium term, and frameworks and laws in the long term.

1. Individualization
   When there is no unified standard, individuals have their personalized needs, so everyone’s definitions of various matters differ.
   For massive socialized matters, the stability and randomness of outcomes, almost every individual's perceived framework standard has been proven.
2. The issue of seeking truth:
   ① What is the proportion of natural sciences and sociology?
   Your pursuit of 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? 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 of 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 determines, 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. Seeking 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.

"✅ Seeking 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's definition of sociology is.
3. Be clear about what society considers to be true.
   Find the intersection between your pursuit of truth and society's pursuit of truth. Determine the time when the intersection collides—short, medium, or long?
   Long-termism: the timing of the handover is far from you.
   Long cycle: bet on things that are not easy to change.
   Short cycle: find price differences, arbitrage.

"✅ Medium term - Difficulty in narrative changes"
The medium term is a collection of N short-term trades.

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

It is advisable 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 U.S. stocks, as the domestic cultural environment is entirely different.
The framework of seeking truth in natural sciences + personal preferences has a certain personal tendency, tracking and studying the medium-term changes of things, knowing how much stronger you are than others. If you are not much stronger, it is advisable to invest in an ETF-style manner.
"If you misjudge"
The long-term is composed of countless trading fragments. Each fragment will have a price quote, i.e., the signal of market consensus.

• If one or two signals differ greatly from yours, it’s not a problem; if the continuous signal trend is completely different or mostly different from yours, it’s just that fate is 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 put all your eggs in one basket.

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

• Subjective individuals may think they are the impressive ones turning the impression wheel; humble individuals will realize that the wheel can turn thanks to many invisible people and hands helping you turn because they need you to turn this impression wheel.

• ✅ Long-term - Extremely high requirements for market environment" High demands on the environment, 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 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 you can find something in your life that you genuinely enjoy, that you are not conflicted about, and that has cognitive advantages, focusing your time, energy, and life on that thing is a great happiness. 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 cognitive advantages, concentrating on the right track, and feeling good after diversifying. But when the environmental disruption arrives, the above three points will be shattered.

• There are no signs, and it has nothing to do with your efforts, and then things end. You cannot change the environment; you must learn to improve your abilities. The rhythm of environmental changes matches your rhythm, and the positive feedback results obtained will always be nonlinear; conversely, negative feedback results are also nonlinear.*

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

Thinking from the perspective of the game, if flipping xx will benefit the elite class on Wall Street, then xx is likely to flip (wonderful)! (Refer to the 2008 subprime mortgage crisis, Silicon Valley Bank)

But as long as the environment does not change, after xx flips, capital appreciation will still drive everything. (Refer to the British stock market) After the game ends, it returns to the right track. So, U.S. stocks are expensive, they may crash, but U.S. stocks can also reach new highs~

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

Essentially, it is a question of every 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 that weighing machine are stable and unchanging.
• 3. The things on the scale have not changed. (Changes in domestic real estate)

Discovering pricing errors—

Find "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 does not talk to young people about investing because they lack the experience of economic cycle sample sizes and cognitive frameworks)

If the environment remains unchanged for a long time, the world will eventually come to me. We can layer and utilize short-term prices (Mr. Market) that will always give a point that does not require super strong cognitive advantages to distinguish cheap points, and buy in large quantities. (Buffett has not spent big money for 16 years...)

Concentrate but do not disperse—

Starting from the internal scoreboard, concentrate on things where I have cognitive advantages, where I understand and excel, and where I am 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 when you make a mistake.

If you have received negative feedback, it is highly likely that you do not have cognitive advantages or that 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 is the 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, and that is already very happy! (Finding someone who knows what they like in their lifetime is very rare.)

Being self-important or always thinking about changing one's name is not wrong; it is just that blindly tossing around while being indifferent to everything around you, neglecting many happy people in life, is really stupid. (Remind myself repeatedly!!!)

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

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

Unless you are the rule-maker or participant in the environment. (Pelosi ETF)
We are not rich in resources.

Buffett can be learned from but not copied. (U.S. stocks serve capital; capital appreciation is the only goal-oriented; 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 your expansion ability. (Expand cognitive volume, Bayesian algorithm probability optimization)

How to identify environmental mutations? How to adapt to mutations? Adapting also requires matching rhythms; when matched, positive feedback is nonlinear and huge; when not matched, negative feedback is equally terrifying. (Refer to the 2008 subprime mortgage crisis's bearish ending due to rhythm; refer to the big... in this discussion of the real estate market...)

Some golden sentences—

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

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

That is just fate not taking that intersection; it is 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 plays a huge role in the background.

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

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

"⭐️ Investment world - Six major anomalies"

Anomaly: Counterintuitive, contrary to common understanding, and some rules that exist as underlying assumptions for reasoning and judgment.

(1) Nonlinear growth patterns
The model for valuing companies is based on past growth to infer future growth over the next three to five years. However, 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 passing the 10% critical point, explosive growth begins. The speed of technology dissemination/popularity is also similar.
The financial market has never experienced stable linear growth; it is characterized by sharp rises and falls. This is because many developments in investment and corporate growth are nonlinear.

(2) Non-normal distribution in the financial world⭐️
Power law distribution is more common in this world. The important minority and the trivial majority, the 80/20 rule.
Power law distribution is the most powerful force in the universe, completely defining the surrounding environment, often unnoticed by us.
Wealth = resources + luck + talent + ...
The results of infinite games will increasingly concentrate.
📚 "Capital in the Twenty-First Century" states that the speed of human capital appreciation exceeds the speed of wage growth. If wealth grows by 5% annually 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 gains may contribute to a large portion of cumulative gains (the nonlinear nature of rises and falls).
  Spatial dimension: A few companies contribute to most of the market's rise.
  Response: Most investors lack the ability to find the few outstanding companies; it is better to buy indices.
  The financial market is mostly calm, with only a few moments of lightning strikes.
  Look at the big picture: long-term in a continuously growing economy.
  Valuation: More effective in the long term. Market valuation consists of corporate earnings, risk-free interest rates/discount rates, and dynamic views of changes in interest rate cycles and earnings growth.
  (3) Discontinuous growth in the real world

(4) Non-independent individuals in cyberspace

Everything in the world is interconnected, even causally related, and mutually influential.

For example, the width of a horse's behind → the width of a Roman chariot → 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 and 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 methods"
Finding problems requires looking from different angles; solving complex problems requires possessing expertise in various fields.
(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 does not have clear turning points to predict, nor observable indicators to track.
  The difficulty of judgment is high for mid-term and long-term cycles.
• Market cycles: each cycle is not the same length, and I do not believe it can be predicted. The only ruler to rely on 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 deleverage, which has profound effects due to high industrial relevance.
• Liquidity cycles: the most leading, which may drive the short-term economic downturn.
• Individuals: Anyone will maintain a cautious posture. Only optimism can survive. If optimism is initiated, you may endure 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, nor can one replicate the markets of other countries; policy is very important.

3. Long-termism thinking
   The probability of losing money in the stock market in a day is slightly lower than that of tossing a coin. But over ten years, it is 6% (in the U.S. 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 laws 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 structural hole positions is greater.
   Scale-free networks: Most ordinary nodes have very 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"
The fast and intuitive system 1 and the slow and rational system 2.
In investment, one is often driven by emotional impulses. Clearly, one should think slowly but ends up making decisions in a fast-thinking mode. 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 mission 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 similar. From the perspective of appreciation, gold needs to be stored and cannot produce new gold. But it can serve another function, that is, a hedging tool.
• 3. Hedging macro risk function - Inflation: Corporate profits sharply shrink, and stocks become ineffective. Physical assets, inflation-linked bonds, natural resources, commodities, real estate, and infrastructure. Due to adjustments and reconstructions of raw material prices, and fees can be adjusted with inflation, they have the function of hedging inflation. - Deflation: No demand for enterprises, and stocks become ineffective. Money itself becomes more valuable; holding high-grade, long-term, non-redeemable government bonds can stabilize cash flow-generating 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, have little relationship with the macroeconomic market. For example, quantitative, event-driven, long-short trading strategies. The Yale 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. And expenditures such as children's education and family responsibilities leave very limited funds for long-term investment. It is advisable to place funds in ordinary financial products or current and fixed deposits, as there are no alternatives. Wealth accumulation is not enough, and there is a lack of understanding of alternative assets, which cannot 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 engage in large-scale asset allocation or global allocation. 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. Medium-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 technical indicators, the more effective they are because they reflect the psychological behavior of countless investors combined. Asset allocation is a combination of science and art; in different periods, the dominant forces driving the market are different, and the driving factors are different. The investor's sensitivity to the market and experience is 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 comes from not playing by common sense, from being able to break out of the box, break the game, and be more creative.

• "✅ A once-in-a-century major change" The so-called major change, whether in a hundred years or a thousand years, has its origin. 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: The concentration of wealth is naturally inevitable, but it must be alleviated periodically through redistribution. They believe that the entire economic history is the heartbeat of a social organism, and the concentration and redistribution of wealth is 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 capacities 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. The new starting point of 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 in simple, intuitive, and emotional stories; individual clarity may not necessarily lead to a good life. More rationally and clearly view these narratives.

The previous cycle of efficiency → fairness lasted from the 20s and 30s to 1980.
The previous cycle of fairness → efficiency lasted from 1980 to 2022.
Currently, we are in the cycle of efficiency → fairness.
The peak of the efficiency cycle: 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 the monopoly profits of monopoly capital.
Now, such strong anti-monopoly actions lead 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 goes off track, it will enter monopoly. Maintaining the status quo is impossible; if you don't take this path, you have to take another.
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 we derive Newtonian mechanics.
Reading: First thin the book, then thicken it.
Research paradigm: Do not think of it as a straight line; do not think it is completely impossible to study. If cycles exist, what forces are leading.

"✅ Fairness cycle" Stock market returns reference the U.S. 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 on U.S. 10-year Treasury bonds. When researching complex matters, it is best to start from the simple. The yield on U.S. 10-year Treasury bonds is a particularly good grasp for observing long cycles, while also containing policy intentions and market forces. Because the U.S. is the global financial center,
• After peaking in 1981, there was a long 40-year decline in interest rates, which indirectly pushed up all asset prices, leading to a general rise in global asset prices. Any compounding phenomenon cannot be perpetual. Throughout the fairness cycle, do not think of making big money through the stock market. From the peak in 1929 to the end of 1980, the U.S. 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 independence. The financial market is dominated by the endogenous forces of Wall Street or the capital market, while monetary policy only plays a supportive or corrective role. Now, the U.S. financial market is built on the operations of the Federal Reserve, and the U.S. economic cycle has become an endogenous variable of U.S. monetary policy; raising and lowering interest rates is a political decision. Raising interest rates → unemployment, lowering interest rates → bubbles. The original cycle cannot continue; 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 not evenly distributed. The efficiency and fairness cycles are also peaks and troughs of wealth moving from concentration to redistribution.
     "✅ Involution era" The characteristic of the monopoly capital stage is that capital kills capital. The vast majority of entrepreneurs in industries suffering losses hate those peers who can drag them into 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, reflecting in society as varying consumption tendencies; the wealthier individuals 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), resembling an endless pit.
     "⭐️ Cycle turning" Once the turn begins, it spans a generation. Transformation: 10Y Treasury yield. It better reflects the supply and demand situation in the middle and long-term changes. The competition between China and the U.S. is a 5-10 year cycle, smaller compared to the fairness and efficiency cycles. If U.S. stocks fall next year, the Federal Reserve will definitely lower interest rates, but doubts remain about whether even lowering rates can save the situation. In the fairness and efficiency cycles, the U.S. faces the problem of essential expenditures, and welfare expenditures will increasingly grow. The true impact on the real economy is the yield on 10-year Treasury bonds. Different dimensions have different concerns; regulatory agencies look at the long term, but traders pay more attention to the short term, focusing on the Fed'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. All underlying issues are social contracts, and the contracts signed by the times and each generation are different.
     "⭐️ Learning habits" Regularly reflect, and the research habits should match the research purpose. Fragmented records should be kept in the form of voice, weekly journals (around 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. Suggestion: Read strong media.
     "⭐️ Real estate & deflation" The times are the examiners, and we are the answerers. The papers given to everyone are 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 because the actual growth rate is bound to decline. The key is not to set future inflation expectations too low. China has a tendency towards inflation; a large number of state-owned enterprises and labor-intensive industries transmit faster. When the entire economy decides to create inflation, efficiency far exceeds that of the U.S. Just don't think that China will always be deflationary, as many value scales occur at the level of public opinion. Actual growth rate declines are certain, but nominal interest rates are actual growth rate + inflation, and inflation is very likely to rise again; at this time, some anti-inflation assets are 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 is sub-Saharan Africa, Australia, and North and South America, which are vast and sparsely populated. The long-term prospects for the Chinese economy, in total, may surpass that of the U.S., but per capita surpassing the U.S. is impossible 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 U.S. are chain immigrants (low-end immigrants). Suggestion: Live for half a year before making a decision.

Discussing bank stocks again, and the survival principles within the fairness cycle -#

It’s time for Teacher Chang to return. He is the author of "Civilized Capital and Investment" and "Buy 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 intention behind writing the book on bank stocks, the shift from efficiency to fairness cycles, and how to invest more scientifically by learning from history. We even discussed whether to immigrate. 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 some relatively good results. I feel that there was one sentence I didn’t dare to say during the last recording because it felt impolite for a first meeting. To be honest, I was a bit worried about your book on banks. I don’t know if you play Xueqiu much; I’m particularly afraid you might fall into that initial curse; you should have heard of it, which is clearly tied to a certain type of asset because prices will definitely fluctuate. Such books can easily become evidence in the future, you know? So, for example, if the price of this type of asset drops in stages, 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 Xueqiu or Dongfang Wealth; I know they exist, but I never look at them. But what you just said is great: it should become future evidence. That’s exactly why I wanted to write this book, and I wanted it to become future evidence.

01:53
I’ve talked about this with many people, and they say, "How much has the bank bought for me? Is there any return?" In fact, I want to say that my bets on stocks are not as significant as my bets on this book. That is to say, this book will become my greatest 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 of my life’s value. So I specifically wanted 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 "Buy Bank Stocks."

02:30
If you look at the English version, it’s called "Buy and Hold Bank Stocks." There’s a clear statement in my book: buying and holding bank stocks is not about trading stocks. So those who trade stocks are not on the same path as me. Therefore, I don’t want you to treat buying bank stocks as a way to trade stocks. Including the short-term fluctuations that just happened, the adjustment of our bank stocks occurred at the end of summer. But if you look at August, both the rise and the fall were 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 selfish, I don’t want them to come. I hope that this playground is filled with people who buy and hold, willing to accept a 6% to 5% dividend rate; only then can you enter. If you want to go out in the future, it’s understandable if the valuation reaches above 1 times PB, 1.2 times PB; this will create a very smooth trend. We use a concept called the Sharpe ratio, which is returns divided by volatility; my Sharpe ratio will be very high.

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

03:56
For some who may have a bit of long-term affection 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
However, we say that no strategy can traverse 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 traverse cycles or something that develops in a snowball manner. In fact, we can see that over the past year, the rise of bank stocks has mainly been driven by valuation increases, while their performance has actually slightly declined. I looked at that chart the day before yesterday, where EPS, valuation repurchases, and dividends contributed to the performance of 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 trade Buffett made when he bought Coca-Cola in the 1980s. That kind of sustained increase due to 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 0.6 times PB; I believe it is definitely undervalued below 1 times, and 1.0 to 1.2 may be a reasonable range, while 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 sufficient, and its absolute size is very large. If you calculate it in terms of amount, it’s about 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 way, I have a very strong sense of intellectual superiority, you know? If I were in a boom cycle, like new energy photovoltaics, I would see deeper than everyone else. I have more understanding of the management team, and I have more understanding of the technical route, which is possible. But this so-called intellectual lead is short for a few weeks and long for three months; it will definitely be caught up by everyone.

06:14
Where is your strength? I can make a PPT for two hours about the technical route; if you tell me what the chairman’s route is, and how the future plan will be internationalized, that’s just it. But bank stocks are not like that; even if I sincerely published a book, I sincerely wrote articles, and I kept 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. In a way, 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 exist; those who trade stocks, I hope you continue to trade stocks. In fact, there are still relatively few stockholders in China, right?

07:02
The number of stockholders may be tens of millions, 100 million active stockholders, while the other billions are not trading stocks. What problem can I solve for this part? If you originally did bank wealth management, did trust, and got a relatively high return, you were very stable. Now, the first customized reform, besides the nearly 50% of current deposits being truly risk-free, you have to bear some risk for everything else, the logical risk. This forms a spectrum of high-risk, high-return, high-risk, medium-return, and high-risk, high-return.

07:32
If you are willing to move along this spectrum a bit, then bank stocks or high dividends, or central state-owned enterprises 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 might see a 10% return in a month, or even a 10% rise in a week, followed by a 20% drop. If you often hold these central state-owned enterprises with high dividends, 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 a portion 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. Originally, from the 200,000, you can take out 50,000, and from the other 80,000 in indirect allocation, you can take out 200,000 or 250,000 to make 300,000. This part, you put in the stock account, you buy bank stocks, you buy large central state-owned enterprise stocks. Then you don’t need to trade; it doesn’t affect your stock trading part; your stock trading funds continue to trade. So your focus is not on trading; it’s on holding; you are waiting for the realization of that dividend rate every year.

08:56
So I come back to say 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, there are three groups of people who contribute extra, which is a bit of a joke, but that’s the case. The first group is smokers, the tax base from smoking. The second group is lottery players, the poor tax; 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 leeks are state-owned assets, whether it’s 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 (partial):
✨ 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, with a significant increase in their rise, and a valuation repair space of about 50% to 100%, with an absolute scale that is enormous. Bank stocks are not like Buffett's purchase of Coca-Cola in the 1980s, which was due to high endogenous ROE leading to continuous increases; 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 those willing to accept a 6% to 5% dividend rate, hold long-term, and expect to sell when bank stock valuations reach above 1 times PB can enter; such a trend will be very smooth, and the Sharpe ratio will also be relatively high. 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 method 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 their funds to buy bank stocks or other high-dividend, low-risk central state-owned enterprise stocks, thus obtaining relatively high returns while reducing volatility risks and enhancing holding experiences. For stock trading funds, continue trading, but the focus should be on long-term holding, waiting for the realization of dividend rates.

✨ 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 free cash flow situation of enterprises. Necessary conditions include safety, security, and genuine willingness to pay dividends. As investors deepen their understanding of 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.

✨ What levels are investment opportunities divided into, and what are their characteristics?
Investment opportunities are divided into three levels.
The first level is the most basic, which is to discover good stocks or good industries, potentially achieving the career of a researcher or fund manager.
The second level is opportunities at the level of institutional design, such as restructuring stocks, directed placements, etc., which can create a batch of institutions or even business segments.
The third level 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 effects.

✨ What is the relationship between the current economic cycle and monetary policy?
The current economic cycle in the U.S. 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 and 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 financial markets?
The Federal Reserve may save the market through interest rate cuts, especially against the backdrop of intensified U.S.-China competition. However, the effectiveness of interest rate cuts is uncertain, especially considering the increasing pressure from government welfare expenditures and debt financing. In the long run, the yield on 10-year Treasury bonds better reflects changes in the economic fundamentals and the real economy.
How do you manage and handle a large amount of fragmented knowledge?
Initially, I used diaries or reviews to record thoughts, but due to the overwhelming amount of information, it became difficult to summarize over long spans, so I switched to voice recording, organizing weekly journals, keeping them within 200-300 words, and conducting annual and ten-year comprehensive reviews and extracting key points.

✨ 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 and other aspects. Its viewpoints are sometimes not intentionally blackening China but are limited due to cultural differences, especially when facing difficulties in interviewing high-level officials. Therefore, it is advisable for readers to rationally treat the level and information authenticity of the media, without overly high expectations of their knowledge depth that exceeds actual capabilities.

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

I also found some updated data for everyone to better feel the fairness and efficiency cycles:
Data source: World Inequality Database

Red line: Top 10% population

Blue line: Bottom 50% population

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

2. "The recent decline in bank stocks is due to the exit of speculative investors who entered recently," 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 volume declines; in fact, you cannot determine whether speculative funds or investment funds are exiting.

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 of focusing on fairness and its ambiguous relationship with bank stocks has not been clearly stated. 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 good.

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

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

• Paul Graham, July 13, 2023

• 8998

• 129

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

What answers does this veteran entrepreneur, who simultaneously earned a Ph.D. in applied sciences from Harvard while taking painting courses at the Rhode Island School of Design, have regarding "how to achieve greatness"?

If we gather the qualities that can lead to great achievements in any field, what shape will we see?

Fortunately, this Silicon Valley godfather has slowly sketched the silhouettes of these qualities for us, and his method of drawing is devoid of any urgency or anxiety. On the contrary, while slowly understanding what it takes to achieve greatness, his words flow like cool stream water entering this summer heat, bringing tranquility and introspection.

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

With knowledge and action, Luoran

Original text: How to Do Great Work
Author: Paul Graham

If we were to summarize the skills needed to achieve great accomplishments in any field, what commonalities would they share? I decided to seek the answer to this question through practice.

I initially wanted to create a guide that could be used in any field. However, I was also curious about what skills lead to great accomplishments. While writing this guide, I discovered that this skill list has definite answers and that 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 possess the following three qualities: you have a talent for it, you have a strong interest in it, and you have space to showcase your talents.

In real life, you basically do not need to worry about the third point; ambitious people are already conservative enough in choosing platforms. So what you mainly need to consider is your talent and interest.

These two things sound simple but are difficult to find. When you are young, you do not 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.

The method for finding goals is to practice. If you do not know where to start practicing, just make a guess. More importantly, get moving. You will occasionally guess the wrong direction, but that’s okay. Learning about different things is always good; some of the most significant discoveries come from linking different fields.

Cultivate the habit of creating your personal projects. Simply put, find what you want to do. Do not let others dictate your definition of "work" or "career." If one day you achieve greatness, it is likely that you will have done so through your own project. Although it may belong to a larger career landscape, you are the core driving force behind that part of the outcome.

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 age 7 excites you, self-learning calculus at age 14 excites you, and focusing on unresolved physics problems at age 21 excites you. These things will change, but the genuine excitement remains.

The curiosity that arises from this excitement is both the engine of great endeavors 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 something that you cannot suppress your curiosity about, even if others find it boring? That is what you should do as your great thing.

Once you discover something you are genuinely curious about, the next step is to learn enough knowledge to take you to the top of the industry. Knowledge accumulates slowly; from a distance, the knowledge you possess may seem to form 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 skill, as our brains tend to ignore these gaps and deceive ourselves into building a simpler cognitive model of the world. However, many discoveries come from asking questions about things that others take for granted.

If the answers you receive 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 indeed appears, I suggest you embrace it rather than try to change it.

Bravely pursue unconventional ideas, even if others are not particularly interested in the topic. In fact, the disinterest of others 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 significant amount of time and energy. Indeed, our efforts do not guarantee greatness, but from extensive experience, not putting in effort certainly leads to failure. The prerequisite for continuous investment is your own interest. Interest and curiosity will drive you forward more than maintaining a habit of diligence.

Curiosity, joy, and the desire to achieve greatness are three of the 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 has the potential to grow out of the gaps. You discover the cracks in the surface of knowledge, break them open, and then glimpse a brand 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 real endeavors a bit late due to incomplete information.

The essence of ambition exacerbates this problem. There are two types of ambition: one exists before you find your point of interest, and the other 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 discovery, you can only rely on yourself. Some lucky individuals may guess correctly at once, but the rest will stumble along with most people, repeatedly researching among many paths.

So what should you do when you are young, ambitious, and unsure 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 individuals. Luck plays a significant role in finding the career you want to explore. Great individuals often stumble upon the right path after encountering a benefactor or a good book, leading to a flash of inspiration about what great work to pursue. 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 mathematics truly studies are far 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 about whether your point of interest differs 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 something is right for you is that you find even what others consider complex and daunting to be delightful.

However, unlike fields and humanity, you do not need to remain loyal to it. If you discover something more exciting 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 achieve this is to create something you would want for yourself, write stories you would want to read, and build tools you would want to use. At the same time, because 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 are most appealing to read are the ones you want to read. I repeatedly emphasize this point because many people think about this issue incorrectly. They do not pursue what they want but instead create something imagined that supposedly more mature audiences need. As long as you think this way, you will be lost.

When