Knowledge is Profit

Inverting Ignorance with Information Arbitrage

When investing we all have to make decisions about what to invest in, based on our risk tolerance, appetite for gains, access to the market, capital, timeline, and many other factors. Ultimately to reach an informed decision and take action.

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The double inversion of investment risk:

1. CONTRARIAN

DIY DOOMERS
The game is rigged, stack metal, crypto, and decentralization.

2. ACTIVIST

IGNORANCE IS BLISS
Trust the professionals, can’t compete with sharks.

CONVENTIONAL WISDOM
Everyone does it, so it must work. Safe as houses.


3. RELATIVE STRENGTH

KNOWLEDGE IS POWER
Brainpower is the investment superpower. The gains demonstrate wisdom.

Recap

a) The contrarian has lost faith in others and wants to rely on themselves.

b) The activist lacks confidence in their abilities to not get burnt.

c) Relative strength is found by knowing the rules of the game and seeking information arbitrage wherever it is found.

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In April 2020, we wrote about the decline of experts and the rise of the critical thinker, in light of the changing world order COVID 19: The Truth Serum

Our investment approach is a very traditional financial one - not NFTs, meta, or crypto. For the simple reason that if you understand stocks, bonds, commodities, public/private, market capitalization, sheer liquidity, margin, and the intricacies of equities, you can create a real edge. Nothing is based on fads that can come and go.

The edge comes from the information arbitrage that exists when defining a risk profile. Abdul flying to Afghanistan has a lower risk profile than Jane for various reasons.

If you wanted to play the game with cultural assets, you’d be much better off sticking with sports-related opportunities if that’s where your interest is, rather than music or other entertainment content.

The cap rates of lower-risk assets and the fact that everyone plays real estate is overcrowded. As a mental exercise: if have the cash to invest, do you buy a house or start a business (equity)?

In fact, most equity (private / public) has a failure rate of 85% or possibly a 1/5 ratio of the business lasting over 5 years.

If you consistently play with equity (public/private) for years without devaluing /debasement, then you have an edge as equity always yields more. That’s the information arbitrage.



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