not that kind of GOAT
Friends,
Going on Corey’s quant podcast this past week led to a big surge in subs who if they hadn’t found me by now are probably expecting a lot of investing/quant material in the letters. The Thursday paid content is almost always that stuff. Sundays there’s always a Money Angle section.
But Sunday is the OG Moontower.
We can go in any direction and I often talk about what’s going on in my personal life insofar as I think others could find something useful to borrow from it (my wife Yinh complains that I don’t do this nearly as much as I used to and the feedback she gets from our mutuals is it’s their favorite part…I always suggest people just follow her insta cause that’s infinitely more endearing than vol trading.)
Today’s letter is some unfiltered wistfulness.
This week closed a memorably joyful July. It started with our vacation in Portugal and NJ with my side of the family celebrating my mother’s 70th. Then when we returned to CA we resumed our 3rd annual summer tradition — Cousins Camp.
The past couple years we have hosted our nieces and nephews who with our kids make a cult of 8 ranging this year from age 8 to 14. My wife’s sister’s fam lives next door (our properties are connected through our backyards where we removed a section of fence). My mother-in-law lives with us as well. It almost sounds Mormon until I remember that my mother-in-law is the eldest of 12 (most of her siblings live within 30 minutes) and then I’m just — nah, this is regular Vietnamese living. Except they keep a big Egyptian ogre around. They feel better about themselves and I eat well. It’s a good trade.
This year, we did 2 weeks of cousins camp instead of 1. Yinh’s brother’s family hosted in Sacramento for the first week. The kids went to a day camp at a lake where they learned to sail and curse the 108 degree sun and spent the evenings swimming, playing boardgames, making their own pizzas and otherwise living like it was 1965 (there are no devices allowed at cousins camp but there is an occasional movie night).
For the second week, they were at our cult compound. They’d spend the days at an art studio with an amazing teacher named Jen (she owned the in-home preschool my kids went to and now hosts art workshops). Jen has been a huge part of cousins camp the past three years. She meets with Yinh over wine a couple times a year to plan for this single week. (I’m understating our relationship with Jen — she’s become a good friend and is as close as we are going to find to a parenting coach given her experience in 30 years of teaching — we talk to her about everything related to these savages).
There’s always a big collaborative project. This year it was making a motion capture movie based on Inside Out. Each kid was an emotion and needed to build the set for their scene. At the end of cousins camp the parents gathered to watch the short film. Each child also had to present their set and discuss why or how they got assigned the emotion. There was a debate and rebuttals process — we have a recurring theme in these camps — become a better communicator by understanding how you feel and how you make others feel. Is the energy your bringing the energy you intended to bring? When you communicate with a goal, are you doing it in a way that will actually achieve it? (This very much reminds me of Ed Thorp’s simple filter: What do I want to happen and if I do this what do I think will happen?). With most of these kids now in middle school, the plots are slowly thickening.
One of the most satisfying aspects to this whole tradition is how the kids anticipate this week all year. They have a special mutual bond with Jen. 5 out of these 8 kids are rambunctious boys who love sports, farts, and pranks but they are somehow still stoked to spend 7 hours a day in a studio to craft, write, and otherwise do stuff that kinda looks like school. Although instead of Four Square and basketball at recess they play banana tag in a warehouse (some of the other tenants are also a fun treat — this year one of the biggest Pokémon YouTubers is in there and gave them all free cards, last year, they got to tour the fantastical workspace of Lady Gaga’s costume and dress designer).
It’s hard to draw conclusions for why they love this so much. Jen is warm and energetic, but also stern and direct. She challenges them. She has high expectations. I could easily imagine some of the kids acting mutinous — partly out of competitive attention-seeking that is common at these ages but also as a cover for not having to risk trying and failing. Yet, Jen is a warrior and rebel herself. She’s wrangled with more than her share in life. Her glance says “you’re putting on this front but I see the scared, insecure child inside — nothing I ain’t seen before and I got all day”. But with just the most OP mix of compassion, toughness, and love. She’s on the short list of people I try to channel in guiding the kids (which I do poorly — I don’t understand kids like she does because my blindspots are big enough to miss a neon green Mack truck).
The parts of Cousins Camp after the studio are the stuff of everlasting summer memories. Marco polo, dinner al fresco, the constant singing. I taught them poker on Wednesday and they were hooked. My youngest niece is the sweetest, most innocent little girl. Turns out she has alligator’s blood. F’n wrecked the rest of the little punks in the tourney.
We ended the week with a trip to one of those mini golf places with an arcade, bumper boats, laser tag and the family favorite — Go Karts. They let us close the place with just our family on the track for 3x the typical time slot. Sure we inhaled the equivalent of 10 packs of unfiltered Camels but that’s a fitting price for a 1960s summer.
The Sacramento cousins have now went home. The band is broken up after 2 weeks of slumber parties. They’ve all given their feedback on what they liked best and least so we can make next year even better.
We only have 1 week before school starts.
[Our kids, their next door cousins as well a few of their friends are going to Jen’s studio for 4 hours a day this week for a new experiment — “writing camp”. We’ll see how this goes but they seem to be looking forward to it. Maybe when they’re grown, they’ll confess that Jen bribes them with Otter pops.]
It hasn’t hit me yet but I’ll be sad. The past 2 weeks have been so, so nice. Yinh and I had a week without the kids for the first time ever (we’ve went away without them but were never home without them). A couple date nights and a weekend in Sonoma to celebrate a close friend’s birthday. Yinh had a palm reader who she’s known for a long time even come to the vacation house and give everyone their own analysis. Judge away nerds. The Sunday letter hits different.
I already know what I’ll miss the most.
The car rides. We spent a lot of time on the 680 with kids’ playlist looping that “boots with the fur” song, The Real Slim Shady, TSwift, Too Sweet, Livin’ On A Prayer, Take Me Home Country Road (that one surprised me). In between car karaoke we’d chat. And of course Uncle Kris got reported for being Uncle Kris — one morning I asked them what they would do if they were on Let’s Make A Deal. I sat back and let them debate whether you should stay with your original door or switch. I explained that the answer was controversial in its time with mathematicians arguing with each other and with some regular people including a nun getting into heated exchanges with some of these pros who turned out to be wrong. I then offered them the 1 million doors version to see what they’d do (they properly switched in that example). Then I asked what about 10 doors? They switched still. But then when I went back to 3 doors several of them wen t back to “stay”. The illusion is indeed powerful.
On the ride home I gave them the answer and my preferred explanation which they seemed to understand. But the problem also lent itself to another learning opportunity. I explained that if we actually simulated the game with many trials that the “empirical” (had to teach them that word) result would converge to the theoretical answer with enough trials.
A little Excel before dinner and they could push a button and see how this worked for themselves:
But the best part…my youngest niece, the sweet one who played the role of Teddy KGB in our poker story, was earnestly distraught to discover that the goal was NOT to win the goat. Switching is better than staying? Ok fine. But this, this was a bridge too far. What could be better than a goat?!
[Side note: I primed the kids on the lesson of the simulation by socratically extracting their built-in intuition for law of large numbers. I asked them if they would surprised if they got 7 heads in 10 coin clips and they said no. But they admit they would be surprised to get 700 heads out of 1000 coin flips. I’ve never given a lesson standard deviation but it seems like there’s some native appreciation for how it might work.
Last year, I did give a related lesson to my eldest and some of his friends that uses mean absolute deviation to help the kids understand the math reason why we can label certain events “unusual”.
You can find stuff like this in my collection of Math Riddles/Puzzles
If there’s any instrumental reason for sharing all this it’s really up to you to decide. I will just observe that making the last couple weeks happen took a village. It’s a lot of prep, logistics, meals, and mindshare. It required flexibility in several people’s schedule. It’s a microcosm of a lot of our personal choices. Family is the biggest priority in the way we live. And you’d be a pollyannish bright-sider to pretend that it doesn’t conflict with other priorities.
I listened to Lebron in an interview a few months back and he was super frank about what it takes to play for that long at a high level. He conveyed 3 incredibly thoughtful points but the one I remember well is how he understood the toll it takes on his family. And the subtext there is not right or wrong, selfish or glorious. Lebron is a totally unrelatable character but in that moment it was a humble reminder that even for him— you can have everything…but not all at once.
Yinh and I make a lot of choices that feel suboptimal even when we are making them. But it’s about stuff for which “optimal” is at best a local max. Still, even knowing that doesn’t fully soften the inner conflict. There’s always this irreducible amount of dissatisfaction. Nature (played by Morgan Freeman) was like “welcome to earth my newest species, you shall be afforded choice on an unprecedented scale…but there is one minor matter, you must accept a haunting from within your enlarged frontal lobe”.
These memories waiting to dry are the antidotes to the Mario Kart time trial ghosts we usually can’t ignore.
This was a lot of words to confess that from childhood until now I’ve still never come down from a summer easily.
Money Angle
Here’s a podcast episode that will be immediate trader canon:
Finance and internet genius Patrick McKenzie started a podcast called Complex Systems during his sabbatical. His very first interview is instant canon for trader education:
领英推荐
???How the Smart Money Teaches Trading with Ricki Heicklen?(100 min) Patrick and Ricki discuss real problems in trading, how trading is taught, and pedagogical game design.
Ricki is a former Jane Street trader who now runs trader bootcamps. Like “real estate seminar”, “trader bootcamp” is a word sequence you should mute.
This is an exception.
I’m not stepping out on any limbs when I say SIG (my alma mater) and Jane Street are tops for trader education. This isn’t surprising since several of JS’s early employees were SIG defectors (I clerked directly for some who became key players at Jane and some of its later offshoots).
Predictably there’s significant overlap with this material and Moontower educational content. This is a great opportunity for me to share excerpts from Ricki’s interview with my own commentary and links to where I have covered similar ideas.
1 The demographic of who is drawn to trading has varied throughout history. What is the profile of someone who goes into trading today?
2 On the focus on competition in finance recruiting vs software
3 “I’m going to impart a bit of information upon you to get you ready for understanding the US equities markets…” – if you only had one sentence, what is that?
4 Patrick explains adverse selection in crowdfunding
5 The limit of the adverse selection argument
6 How Ricki’s Intro To Trading Bootcamp opens
7 Why people who have the best model for the world may or may not make the most money from trading.
8 Incentivizing liquidity to overcome the fear of adverse selection
9 How order types leak info
10 Why Ricki’s simulation stocks returns are drawn from a stochastic process rather than use Patrick’s simulation where stock prices were real returns from a time in history (although a user would have no feasible way to identify it)
11 The meaning of arbitrage
12 The challenge of teaching position sizing
13 Why teach high schoolers about trading
14 Patrick tests Ricki with the same puzzle he gave to Stockfighter players: “There are a hundred traders in this market, you have access to the order book, find out who the insider is. How would you go about doing that?”
15 An idea I learned at SIG with a poker analog — “paying for information”…Ricki doesn’t call it that but the concept is here
16 The usefulness of graphs
17 The information game
18 Tradeoffs in defending against info leakage
Money Angle For Masochists
In the next month Ricki will be hosting bootcamps in Berkeley and NYC.
She talks about them in her substack:
You can sign up for the course using this Google Form.
You can follow her on Twitter @tradegal_
If you are down here in the Masochists section you should definitely listen to that podcast episode. It’s not easy to find those learnings laid out so precisely as they would be taught inside the beasts.
From My Actual Life
In Ricki’s episode she talks about various order types in the market. One of them is the “fill or kill”.
This was not a totally uncommon order type in the options voice market. Although I mostly perceived it as a bluff. I can’t count how many times I snapped back to a broker who tried this with a simple “I guess you’re out then”.
This week I sold my 17-year-old Infiniti G35, the family affectionally refers to as Goat. I learned that Carvana also trades likes a sandbaggin’ broker. They made a bid with an expiration date. When the bid expired…they raised their bid.
They don’t show their best.
Act accordingly. There really is alpha in moontower.
Really Carvana? After a few days my 17-year-old beater’s “value went up”.
We actually got offered $6k by a mechanic but decided ultimately to sell it for $4,500 to a friend of the family’s new teen driver. Goat deserves a good home.
Stay Groovy
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