leaf

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

1. Family financial responsibilities
2. Major 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 shown in the image, and summarize them for everyone (though it involves spoilers, to be honest, this movie is just a job, not much to look forward to):

✔️ Midlife unemployment - Family cash flow duration issues

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

✔️ Previous investment in P2P resulted in loss of savings - Major loss 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 lamented: Why is it so precise! Why is it so typical? The screenwriter is really skilled.

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

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

Finally, following the order of the accompanying image, let’s summarize the ideas for middle-class families to become anti-fragile:

1. Family financial responsibilities - Do a good job in risk hedging, lower expectations for parents' retirement, your own retirement, and children's education.

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

3. Family cash flow management - Redundancy, strive for dual-income status, budget for major expenses, maintain a flexible lifestyle, compress necessary living expenses, work hard to achieve a high savings rate, maintain an optimistic mindset, prepare for rainy days, 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... and also look at international and domestic economic cycles. What is fate? The years marked with 🏠 in the image indicate a surge in housing prices, those with 🐂 indicate a bull market in stocks, and those with 🌊 indicate monetary easing. The virtual and real red circles signify the entry of generations into society to start earning money.

For those born in the 80s, there were still entrepreneurial options by the time they reached middle age.

For those born in the 95s, 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.

On the value point, the term middle class implies:

We are responsible for our own assets, work as hard as we can, while reducing initial consumption, giving up some immediate pleasures in the process, thus reaping 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 set of values is embedded in our life rhythms, and it has a great inertia.

Then now, numerous pieces of evidence tell us that the entire set you learned in the past is wrong, and you need to change.

Even deep down, we never felt this set was wrong; we just found that no matter how we pushed this set to the extreme, the returns seemed to be less than before.

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

For instance, the must-read book in our industry that is often recommended, "Rich Dad Poor Dad," features the poor dad as the most typical middle class, a university professor who regards his house as his greatest asset, always anxious about salary, 401K, healthcare, vacation, and benefits. He likes tenure, even though securing this qualification is quite difficult; tenure represents the stability most cherished by the middle class.

Sounds good, right? No!

This supposedly perfect father figure among our parents from the 60s is precisely 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 always insightfully buy and sell assets frequently in the market.

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

When one reaches a certain age, we should think about whether this ranking is applicable in different environments?

For example: In our case, is the financial industry still a people-oriented industry, or is it gradually becoming a quasi-state-owned enterprise infrastructure? I wonder if anyone has thought about this issue?

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

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

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

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

The return on capital investment r > the growth rate of economic or social output g > the growth rate of worker income w

This structure represents the order of profit among various social classes.

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

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

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

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

4. Don’t linearly extrapolate the current state, treating now as forever.

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

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

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

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

"✅ A rough portrait of different generations"
Post-85: Wealthy, no mortgage, no job
Post-90: Wealthy, has mortgage, has job
Post-95: No money, has mortgage, has job
Post-00: No money, no mortgage, no job
People are 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 US is not living well. One side is deflation, the other side is inflation.
The uphill path is hard; earn today, enjoy today; the downhill path is painful; enjoy today, earn today.
Every stage has a corresponding rational narrative that gradually aligns one’s expectations with the reality they are experiencing. No one is truly at the forefront of the times; everyone is being pushed along by the times.
When economic growth suddenly slows down for two or three years, people are more willing to pay a huge premium for this psychological added value (mind, body, and spirit), such as temples and concerts.

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

"✅ Macro level"
The scene has divinity.
Even if the medium and macro are relatively pessimistic, individuals can still see a lot of possibilities and diverse paths.
Talk less with pessimistic people, and seek out energetic young people.
Value perspective: 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 errors, and the other is called missed opportunities.
In investment, mainly avoid errors; in entrepreneurship and certain lifestyles, explore new opportunities, mainly to avoid missing those potentially tenfold or hundredfold dividends.
Dividends: Entering a rapidly growing trend at the right time and becoming a leading player. Enjoying a period of monopoly-like dividends and obtaining excess returns. Knowing that this won’t last long, enjoying the process, and working hard to pedal the bicycle a little faster. But everything you gain is not necessarily the result of personal effort; it’s just that you happened to enter this lane.

"✅ US Stocks"
Most US stocks have stable volumes and can raise prices, but cannot support volume growth. Monopoly and incremental growth mostly lead to premiums.
Do you feel that US stocks are about to crash? Yes. It may still reach new highs before A-shares.
US stocks are expensive, often prone to crashes, but they have long-term upward trends.
Capital appreciation is the only scoreboard for society. First, US 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 with fluctuating dollars.

"✅ Economic Data"
Data caliber: Just ask a few people.
Retrospective adjustments: Changes are made to data from several months or even years ago.
No indicator's data is real.
Each can accurately cool down or heat up the market at that time, completely depending on how favorable the rhythm is for 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 big money in a financial market crash, it will cause it to crash.

"✅ Collective Game"

1. Seek benefits for capital appreciation
   In Western society, capital maximization.

2. Seek benefits for collective recognition
   In Eastern society: the collective believes in a relatively suitable approach.

3. Response
   First, truly seek truth; second, clearly earn money by asking how false the world is.
   Practice: In this wave of high prices, did anyone get a huge profit opportunity? If so, be alert and hedge; if not, once this wave slightly corrects, or the fundamentals catch up, continue to play the stock game.
   Views on US stocks: Monopoly companies; find companies with high growth and incremental potential. Don’t bottom fish for targets that big players want to divide.

4. Mean Reversion
   Truth / consensus has taken effect. But some games are not seeking truth from beginning to end.
   America's biggest tool: the importer of most countries (Party A); asset prices have the highest long-term compound growth and increase, involuntarily putting money here (the world's largest casino).
   The Nikkei 225 has little to do with the Japanese economy because the revenue sources of its main components are highly overseas.

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

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

The borrowed money is spent by the government, starting from large companies, distributing profits layer by layer, while the treasury provides various expenditures for the public.

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

✔️ US debt: unrelated to enterprises, it is the government borrowing money from the world on behalf of Americans.

✔️ Profit distribution: whether government spending or household consumption, enterprises can always get priority in profit distribution.

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

✔️ Tax revenue: besides issuing US debt, tax revenue is the most important source of income for the US government.

From the image below:

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

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

To summarize the ecological niche of American enterprises:

US debt is not borrowed by me, but I can benefit from it. My income source is stable, even showing a logic similar to "subscription," allowing me to continuously draw profits. My tax burden is also very small. Coupled with buybacks and dividends, I can further enhance shareholder returns.

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

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

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

When you are in the common people, you might find this system a bit terrifying; when you are among shareholders, it seems incredibly wonderful, in line with what Taleb calls "asymmetric risk"—the benefits belong to me, the risks belong to you.

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

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

This image is just to tell everyone: the fewer people who died in the past does not mean it was not tragic, because we must also consider the base issue; the 20th century was the 100 years of global population explosion.

We have become too accustomed to the narrative of peace; when stretched over a hundred years, human slaughter has been continuous, and conflicts have not ceased.

In fact, from 1990 to 2020 (Image 1), this 30-year "peace narrative" 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 developing, and efficiency is prioritized over fairness.

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

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

But currently, the US lacks the ability, and perhaps the willingness, to control the outbreak of hot wars any longer.

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: a phase of de-globalization, where fairness is prioritized over efficiency.

✔️ Increment is the biggest fact; without increment, in an inflationary world, 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 increments

2. The consensus of the majority, the views and concepts of human social activities, which may not necessarily relate to facts

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

The three circles intersect in pairs:

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

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

✔️ Individual views cannot take effect; the development of things is rapid and fierce, with incremental facts and consensus mutually reinforcing, everything obeys evolution, abandoning subjective conjecture.

Seek truth from facts, find the intersection.

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

1. Individualization
   When there is no unified standard, people have their own personalized needs, so everyone’s definitions of various matters differ.
   For massive socialized matters, the stability and randomness of outcomes, almost every person's perceived framework standard has been proven.

2. The problem of seeking truth:
   ① What is the proportion of natural sciences and sociology?
   Your truth-seeking in natural sciences and the truth of sociological definitions.
   ② Who constitutes the consensus game in this society? What are their definition 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 leaning towards natural sciences and laws; if it is short-term, leaning towards variability, believe in market price signals; if it is neither long nor short, the consensus and their ideology of the dominant group determine, but you 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 distinctions and differences of those things on the scale are not that significant.

3. Seek truth from facts
   ① The truth-seeking of natural sciences
   Act according to natural sciences.
   ② The truth-seeking of sociology
   That is the needs of the masses, which may change and need tracking.

"✅ Seek truth from facts - Investment"

1. Be clear about what the truth of natural sciences is?
2. Be clear about what the truth of your subjective framework in sociological definitions is?
3. Be clear about what society considers to be true?
   Find the intersection between your truth-seeking and society's truth-seeking. Determine the timing of the intersection collision as 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 definition of trading in your inner market.

It is recommended to learn Buffett's way of thinking to view trading, the spirit of truth-seeking, etc., but it is not recommended to directly copy his methods in any part of the world outside of US stocks, as the domestic cultural environment is completely different.
The framework of truth-seeking 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 recommended to invest in ETFs.
"If you misjudge"
Long-term is composed of countless fragments of trades. Each fragment will have a price quote, that is, the signal of market consensus.

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

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

• Subjective people will think it is their impressive impression wheel turning; humble people will realize that the wheel can turn because many invisible people and invisible hands are helping you turn it, as they need you to turn this impression wheel.

• ✅ Long-term - Extremely high requirements for market environment" The requirements for the environment are harsh, and whether you are the one who survives in that environment, whether your money is long-term money, and whether your voice and influence are sufficient. If you can find an environment that remains 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" The market price mispricing is caused by information gaps/cognitive gaps, patiently waiting for the market to be heavily 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 do you like to do" Use the time saved by embracing beta to create alpha. If one can find something they genuinely like, have cognitive advantages, and concentrate their time, energy, and life on it, they will be very happy. Few people know what they like in their lifetime. Find the intersection: What do you like to do? What can you do? What does society need you to do?

• "✅ The most terrifying thing" The trading environment has changed, and you are completely unaware. You may still be immersed in your inherent impression of cognitive advantages, concentrating on the right track, and achieving good results after diversifying. 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; learn to improve your abilities. The rhythm of environmental mutation matches your rhythm, and the positive feedback results obtained will always be nonlinear; conversely, the negative feedback results are also nonlinear*

• When bottom-fishing is something that will be divided among others, 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 hasn’t changed, after xx flips, capital appreciation will still drive everything. (Refer to the UK stock market) After the game ends, it returns to the right track. So, US stocks are very expensive, they may crash, but US stocks can also reach new highs~

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

Essentially, it’s a question of every wave of people's life cycles.

“Medium to long-term” is determined by the consensus and ideology of the dominant group. There are three assumptions here,

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

Finding pricing errors—

In the environment, find "bargains" to earn the price difference; the core competitiveness of identifying pricing errors lies in "high aesthetics," and the difficulty lies in the fact that "high aesthetics" may likely emerge naturally after mastering a large sample size. (Munger does not talk about investment with young people because they lack the sample size of economic cycles and cognitive frameworks)

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

Concentrate but do not disperse—

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

If you receive 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 receive 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 what one likes in life is very rare.)

Self-importance or always thinking about changing one's name is not wrong; it’s just that blindly tossing around and being indifferent to everything around you, neglecting many other happy people in life, is really foolish. (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 that survive will improve themselves. (Phase transition critical phenomenon)

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

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

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

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

Some golden sentences—

Social resources are limited, but 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 correct their cognition may have been proven.

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

The so-called "anomaly" refers to counterintuitive, contrary to our usual cognition, and secretly playing a huge influential conditional parameter or underlying law.

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

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

"⭐️ Investment World - Six Anomalies"

Anomaly: Counterintuitive, contrary to common cognition, and some rules of existence that have not been used as underlying assumptions for reasoning and judgment.

(1) Nonlinear growth patterns
The valuation model for enterprises is based on past growth to infer future growth over the next three to five years. But in fact, many industries experience nonlinear growth.
For example, the transition of technology, the time taken to go from 0% to 10% and from 10% to 90% is the same, but after crossing the 10% threshold, explosive growth begins. The speed of technology dissemination/popularity is also like this.
The financial market has never been a smooth linear growth; it is characterized by sharp rises and falls. 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 few and the trivial many, the 80/20 rule.
Power law distribution is the most powerful force in the universe, completely defining the surrounding environment, and we are almost unaware of it.
Wealth = resources + luck + talent + ……
The result of infinite games will inevitably become more concentrated.
📚 "Capital in the Twenty-First Century" shows that the speed of human capital appreciation exceeds the speed of wage growth. If wealth grows by 5% 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 rises may contribute to the bulk of cumulative gains (the nonlinear nature of rises and falls).
  Space dimension: A few companies contribute to most of the market's rise.
  Response: Most investors lack the ability to find the few best companies; it’s better to buy indices.
  The financial market is mostly quiet; there are only a few moments of lightning strikes.
  Look at the trend: long-term in a continuously growing economy.
  Valuation: More effective in the long term. Market valuation consists of corporate profits, risk-free interest rates/discount rates, and dynamically viewing valuation levels in conjunction with changes in interest rate cycles, profit growth, and other factors.
  (3) Discontinuous growth in the real world

(4) Non-independent individuals in cyberspace

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

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

The reflexivity theorem discovers mutual causality.

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

(6) Irrational human society

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

• Economic cycles: The inventory cycle is somewhat graspable. The Kahn cycle has no clear turning points to predict, and there are no observable indicators to track.
  Judging medium-term and long-term cycles is very difficult.
• Market cycles: Each cycle is not of the same length, and I don’t 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 continuously deleverage, which has profound impacts due to its high industrial relevance.
• Liquidity cycles: The most leading, possibly driving down short-term economic cycles.
• Individuals: Anyone will maintain a cautious posture. Only optimism can survive. If optimism takes action, perhaps it will take three to five years, but you will definitely see the day of being unblocked.
  In a world of uncertainty, it is difficult to make accurate predictions, and one cannot simply copy the markets of other countries; policies are very important.

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

4. Network thinking⭐️
   What rules in this networked world are worth paying attention to and thinking about?
   Structural holes: The most important nodes in the network that solve information asymmetry. Expanding the value of people who have 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 adopts a fast-thinking mode for decision-making. Therefore, thinking should be disconnected from the internet, focused, and supervised.

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

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

• 1. Value-added function Focus on equity investment and establish an asset portfolio. The destiny of capital is to proliferate. Among all assets, only corporate stocks create value, generate income, and profit, thus providing returns (appreciation). Land and forests are 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 shrink sharply, and stocks become ineffective. Physical assets, inflation-linked bonds, natural resources, commodities, real estate, and infrastructure can hedge against inflation due to adjustments and reconstructions of raw material prices, and fees can be adjusted with inflation.

• Deflation: Corporations have no demand, 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, are largely unrelated to the macroeconomic market. For example, quantitative, event-driven, long-short trading strategies. Yale's endowment fund only does event-driven and short strategies, finding truly capable strategy managers.
• "⭐️ Middle and Low Net Worth Population" In the asset allocation structure of most families in China, real estate accounts for the majority, losing liquidity. Along with expenditures for children's education and family responsibilities, there is very little that can truly be used for long-term investment. It is advisable to place it in ordinary financial products or demand deposits, as there are no other options. Wealth accumulation is not enough, and there is a lack of understanding of alternative assets, cannot bear corresponding risks, and cannot 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 the time to do 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 take effect. The shorter the technical indicators, the more effective they are, as they reflect the psychological behavior of countless investors combined. Asset allocation is a combination of science and art; at different times, the dominant forces driving the market are different, and the driving factors are different. The investor's sensitivity and experience to the market are also particularly important (deduction). Induction always plays by common sense, but the market may not play by common sense, so deduction is also very important. So far, human creativity comes from not playing by common sense, from being able to break out of the box, break the situation, and be more creative.
• "✅ The Great Change Unseen in a Century" The so-called great change, whether in a century or a millennium, has its origins. The macro paradigm shift:
• 1. The cyclical changes of great powers
• 2. The turning point of global wealth distribution: efficiency → fairness. The fourth turning of 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 great expansion and contraction of monetary and financial cycles are unprecedented.
• 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, new energy is a multi-motive, multi-transition, and China has achieved leapfrog growth in this stage.
• 7. A new starting point for technological innovation cycles
• 8. Digitalization. The transformation of digitalization is more influential, more comprehensive, and more disruptive, becoming a new economic factor.
     "⭐️ Response Narrative" Human history is composed of stories. Group psychology: More believe in simple, intuitive, and emotional stories; individual clarity may not lead to a good life. More rationally and clearly view these narratives.

The last round of efficiency → fairness cycle, from the 20s and 30s to 1980.
The last round of fairness → efficiency cycle, from 1980 to 2022.
Currently, it is the efficiency cycle → fairness cycle.
The efficiency cycle has reached its peak: fairness has reached an extremely unfair level, and the wealth gap has reached its peak.
📚 "On Imperialism" Lenin: Imperialism is the highest stage of capitalism. Capitalism, with the development of productivity, corrupts to the highest stage, which is monopoly capital; when monopoly capital combines with the state machine, 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 leads to involution.
The most typical market state is a perfectly competitive market. That is, labor earns meager wages, capital earns standard interest; if there is any debt, all operations are working for the bank. The path to this state is called involution. If it goes astray, it will enter monopoly. It is impossible to maintain the status quo; if you do not take this path, you must take another path.
The intermediate state: destructive innovation, continuous innovation, continuous destruction, but cannot be maintained forever.

"✅ Study History"
The gap between theory and reality: reality is extremely complex, composed of countless forces. Any theory must be simplified.
Use the two-body problem method to 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 variations 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, and there are not so many complex force structures, presenting a simple model. Abstracting it further leads to 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" The stock market return rate refers to the US stock market from the 1930s to the 1980s. From the 1980s to now, it is historically very special, without major wars, each contributing to globalization.

• 1. Grasp: The yield on US ten-year Treasury bonds. When researching complex matters, start from simple ones. The yield on US ten-year Treasury bonds is a particularly good grasp for observing long cycles, while also containing policy will and market forces. Because the US is the global financial center,
• After peaking in 1981, there was a long-term decline in interest rates for 40 years, indirectly pushing up the prices of all assets, leading to a general rise in global asset prices. Any phenomenon of compound interest cannot last forever. 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 US stock market rose 4.6 times, with an annualized return of 2.9%.
• 2. XX Independence. Starting in the 1980s, the economic consensus was that XX should have its own independence. The financial market is dominated by the endogenous forces of Wall Street or the capital market, while monetary policy only plays a supportive or corrective role. Now, the US financial market is built on the operations of the Federal Reserve, and the US economic cycle has become an endogenous variable of US monetary policy; raising and lowering interest rates is a political decision. Raising interest rates → unemployment; lowering interest rates → bubbles. The original cycle cannot continue, and the process of seeking solutions reflects the fairness cycle. The fundamental problem of all economies is that the market cannot continue to expand, purchasing power is insufficient, and consumption capacity is not evenly distributed. The efficiency and fairness cycle is also the peak and trough of wealth moving from concentration to redistribution.
     "✅ Involution Era" The characteristics of the monopoly capital stage are that capital kills capital. The vast majority of entrepreneurs in the entire industry who are losing money must hate those peers who can drag them into industry losses. Growth - supply and demand: typical scientific progress can truly innovate, and the market must have purchasing power recognition and affordability. Wealth concentration affects increments and purchasing power. The marginal propensity to consume decreases is human nature, which manifests in society as everyone having different consumption tendencies; the wealthier people are, the lower their consumption tendency. The continuous cycle leads to the poor having no money to spend, and the rich not spending (no need for extra consumption), like a bottomless pit.
     "⭐️ Cycle Turn" Once the turn begins, it spans a generation. The change: the yield on ten-year Treasury bonds. It better reflects the supply and demand situation in the middle and long-term changes. The competition between China and the US is a 5-10 year cycle, which is smaller compared to the fairness and efficiency cycles. If US stocks fall next year, the Federal Reserve will definitely lower interest rates, but it is doubtful whether even lowering interest rates can save it. In the fairness and efficiency cycles, the US faces the problem of necessary expenditures, and welfare expenditures will become larger and larger. The real impact on the real economy is the yield on ten-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 Federal Reserve's interest rate hike or cut statements, determined by the bonus cycle.
     "⭐️ Ask Yourself" You can only ask yourself; never think about young people, or others, or everyone. First, do not assume that everyone’s decision-making function is the same as yours; you cannot even assume that your decision-making function is a single variable. Chicken soup: The changes of the times are not your fault; as long as you endure long enough, everything is a cycle. The underlying is a social contract; the times and the contracts signed with each generation are different.
     "⭐️ Learning Habits" Often think, and the research habits match the research purpose. Fragmented records are recorded in the form of voice, weekly journals (about 200-300 words), and annual summaries (over ten thousand words), based on which a ten-year summary is 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: Watch strong media.
     "⭐️ Real Estate & Deflation" The times are the examiners, and we are the answerers. The exam paper given to each person is different. The short-term pressure on housing is relatively large, but the long-term outlook is optimistic, but do not expect to make big money. The central bank has repeatedly called for not to keep the yield too low because the actual growth rate is bound to decline. The key is not to set future inflation expectations too low. China has a tendency to inflation; a large number of state-owned enterprises and labor-intensive industries transmit faster. When the entire economy decides to create inflation, the efficiency is far higher than that of the US. It’s just that now it feels like more ammunition is flowing to more urgent times. Never think that China will always be deflationary because many value scales occur at the level of public opinion. The actual growth rate is bound to decline, but the nominal interest rate is the actual growth rate + inflation; inflation is very likely to rise again, and at this time, some anti-inflation assets are needed.
     "⭐️ Immigration" Population issues, short-term variables are related to the economy. Longer-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, North and South America, vast and sparsely populated. The long-term prospects of the Chinese economy, the total amount exceeding the US is possible, but per capita exceeding the US is impossible. Because there are too many people. The middle class or upper middle class is the real basic population for immigration. Most immigrants in the US are chain immigrants (low-end immigrants). Suggestion: Live for half a year before making a decision.

Talking Again About Bank Stocks and the Principles of Survival in 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 he was a guest in the 31st episode of the meeting. Recently, I went to Shanghai and chatted with Teacher Ding about the original intention of writing the book on bank stocks, as well as the shift from efficiency to fairness cycles, and investment in this context, and how to learn from history more scientifically. We even talked about 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 there should be some good results. I feel that there was one sentence I didn’t dare to say last time because it felt impolite to say it on the first meeting. To be honest, I’m a bit worried about your book on banks. I don’t know how much you play with Xueqiu, but I’m particularly afraid you’ll 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, because the price of this type of asset drops in stages, it may consume your personal credibility. Are you worried?

01:35
To be honest, I hadn’t realized this issue before because I don’t play Xueqiu or Dongfang Wealth; I know they exist, but I never look at them. But what you just said is great; it’s meant 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 any stock are not as big as my bets on this book. That is to say, this book will become my biggest source of return in the future. I’m not referring to royalties or financial or monetary returns. This is, to put it grandly, the return on the value of my life. So I specifically want to use a book format; it’s actually a way to break out. In fact, in my book on buying bank stocks, the title in Chinese is "Buy Bank Stocks."

02:30
You see, in English, it’s called "buy and hold bank stocks." In this book, there is a clear statement: buying and holding bank stocks is not stock trading. So those who trade stocks are not on the same path as me. Therefore, I also do not hope that you treat buying bank stocks, this transaction, as a way to trade stocks. Including what you said about the recent short-term fluctuations that occurred at the end of the summer, our bank stocks have adjusted. But if you look at August, the rise was also abnormal, and the decline was also abnormal; it’s obvious that a batch of funds came in, and this batch of funds may just be speculative funds, and for them, it’s more profitable to cash out.

03:08
The stock market is an open market; anyone can come in to play. If I were to be selfish, I wouldn’t want them to come. I hope that in this playground, everyone buys and holds, willing to accept a 6% to 5% dividend rate; only then can you come in. If you want to go out in the future, it’s understandable if the valuation reaches 1 times PB or above, 1.2 times PB; this will make the trend very smooth. We use a concept called the Sharpe ratio, which is the return divided by its volatility; my Sharpe ratio will be very high.

03:40
In a solid statement, 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%, this just increases the volatility; of course, it 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 what others think. On the contrary, I’m willing to take another path, and I ultimately want to prove that this path is feasible; I want it to become my evidence.

04:20
But we say that no strategy can traverse the entire cycle; the price of such assets fluctuates. 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 long-term, or we say snowball development. In fact, we can see that in the past year, the rise of bank stocks has mainly been determined by valuation increases; their performance has actually slightly declined. The day before yesterday, I looked at that chart, and the contributions of EPS valuation repurchase and dividends were shown for various industries. Then I saw that the banking industry, including coal, had a decline in EPS, but 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 0.6 times PB; I think below 1 times is definitely undervalued, 1.0 to 1.2 may be a reasonable range, above 1.2 may be a bit overvalued; that’s how it is. So there’s about a 50% to 100% valuation repair; I think this repair space is large enough, and its absolute size is very large. If you calculate it in terms of amount, that’s about 10 trillion to 15 trillion. To be honest, its logic is very complex; I believe the market cannot digest this logic in the short term. In this case, I have a very strong sense of intellectual superiority, you know? If I 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 this technical route; I can do it. But this so-called consciousness leads to a short period of a few weeks and a long period of three months, and it will definitely be caught up by everyone.

06:14
Where is your strength? I can do a PPT for two hours on the technical route; what route does the chairman have? Can you tell me how this plan will be internationalized? It’s just like that. But bank stocks are not like this; even if I sincerely publish a book, I sincerely write articles, and I keep promoting them. 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 certain sense, not understanding or believing is also a particularly good thing. So first, I don’t want to move the funds that originally existed; those who are originally trading stocks, I actually wrote in that book, that is, I hope you continue to trade stocks. In fact, there are still relatively few stockholders in China, right?

07:02
There may be tens of millions or 100 million active stockholders, while the other tens of billions of people do not trade stocks. What problem can I solve for this part? If you originally did bank wealth management, did trusts, and got a relatively high return, you were very stable. Now, the first customized reform, except for nearly 50% of demand deposits, which are truly risk-free, you must bear some risk for everything else, the logical risk. This forms a spectrum of high-risk and high-return, high-return and high-risk, and medium-risk and medium-return.

07:32
If you are willing to move along this spectrum a little, then bank stocks or high dividends, or the category of central state-owned assets become a very good target. You can get a relatively high return here, and the risk you bear is not as large as typical stock funds. Usually, if you trade long, you can earn 10% in a month, or even rise 10% in a week, and fall 20% in a few. If you often hold these central state-owned assets with high dividends, the final volatility is not that large. Its Sharpe ratio 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 aimed at a broader readership.

08:15
For those who trade stocks, I actually have suggestions. I suggest that they can allocate a portion of funds to buy bank stocks or other high-dividend, low-risk central state-owned stocks outside of their stock trading funds. This way, they can obtain relatively high returns while reducing volatility risk and enhancing their holding experience. As for the funds for trading stocks, keep trading, but the focus is on long-term holding, waiting for the realization of dividend rates.

08:56
So I said at the beginning that I think bank stocks are not considered stock trading for the post-80s. Why do I still say I hope everyone continues to trade? In fact, the rapid development of the Chinese economy has factors of the hardworking wisdom of our entire people; there are three groups of people who make extra contributions, which is a bit of a joke, but it’s actually true. The first group is smokers, the tax base from smoking. The second group is lottery players, the tax on the poor; the third is stockholders. So the premise is that if you voluntarily trade stocks, it is actually beneficial to society as a whole, and things that are beneficial to society are indirectly beneficial to me, so I don’t want to influence them. Understand that leeks are state-owned assets; whether bank stocks or dividend strategies, what do you think are the sufficient and necessary conditions for their effectiveness? I think this is precisely the topic that may start to be discussed in the market in 2025.
Notes (part):
✨ How to view the investment logic of bank stocks and the differences from Buffett's investment in Coca-Cola?
The investment logic of bank stocks mainly lies in valuation repair, with a large increase in their rise, and a valuation repair space of about 50% to 100%, with an absolute size being huge. Bank stocks are not like Buffett's investment in Coca-Cola in the 1980s, where the continuous rise was due to high endogenous ROE; rather, it is a typical valuation repair process, and the market may find it difficult to digest this logic in the short term.

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

✨ What suggestions do you have for different investor groups?
For stockholders, I suggest that they allocate a portion of funds to buy bank stocks or other high-dividend, low-risk central state-owned stocks outside of their stock trading funds. This way, they can obtain relatively high returns while reducing volatility risk and enhancing their holding experience. As for the funds for trading stocks, keep trading, but the focus is on long-term holding, waiting for the realization of dividend rates.

✨ What are the effectiveness and necessary conditions for investing in bank stocks?
The effectiveness of investing in bank stocks lies in their long-term willingness to distribute dividends and stable cash flow; dividends are real and sustainable, reflecting the state of free cash flow of enterprises. Necessary conditions include safety, security, and genuine willingness to distribute dividends. As investors delve deeper into the investment logic of bank stocks, they will gradually understand factors such as business models and intentions of major shareholders, 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 category is the most basic, which is to dig out good stocks or good industries, which may achieve the career of researchers or fund managers.
The second category is opportunities at the level of institutional design, such as restructuring stocks, targeted issuance, etc., which can achieve a batch of institutions or even business segments.
The third category is major reforms at the level of social livelihood and the real economy, such as the reform of stock ownership segregation, which involves the transfer of government power and has far-reaching impacts.

✨ What is the relationship between the current economic cycle and monetary policy?
The current economic cycle in the US has become an endogenous variable of monetary policy, rather than an exogenous variable. This means that the Federal Reserve's operations have a direct impact on the economic cycle, and decisions on interest rate hikes 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 competition between China and the US. However, the effectiveness of interest rate cuts is uncertain, especially considering the increasing government welfare expenditures and the interest payment pressures brought by debt financing. In the long run, the yield on ten-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 review methods to record thoughts, but due to the overwhelming amount of information, it became difficult to summarize over long time spans, so I switched to voice recording, organizing weekly journals, keeping them within 200-300 words, and making annual and ten-year summaries.

✨ How do you view the coverage and understanding of Chinese issues by "The Economist" and other media?
Although "The Economist" maintains a high standard and independence, there are indeed shortcomings in deeply understanding and interpreting Chinese society and other aspects. Its viewpoints are sometimes not intentionally blackening China, but due to cultural differences leading to limited understanding of its complexity, 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 and not to have overly high expectations for its knowledge depth beyond actual capabilities.

"Capital in the 21st Century" outlines the fairness and efficiency cycles through the income share of different groups in the US:

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

Red line: Top 10% population

Blue line: Bottom 50% population

For example, "I think bank stocks should be worth 1PB," without hearing good arguments, is mostly based on impulse. It is estimated that the narrative model based on the historical cycle cannot provide a clear answer on what it should be worth.
2. "The recent drop in bank stocks is due to the speculative investors who recently entered the market leaving," is clearly a subjective assumption and tends to oversimplify the differentiation of investor attributes, failing to recognize the complexity of investors in reality. The leading bank stocks are experiencing a volume drop, and you cannot judge whether it is speculative funds or investment funds leaving.
3. The core theme, the eternal narrative of the relationship between fairness and efficiency, is too simplistic for investment; a cycle is equivalent to half a lifetime, and being right is useless.
4. The historical stage that emphasizes fairness has a mysterious relationship with bank stocks, which 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 (seeking inward).

If you are not willing to be 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 US. In 2005, he co-founded the well-known startup investment company Y Combinator, investing in over two thousand startups such as Airbnb and Reddit. As the company became a widely recognized American startup incubator, Graham also earned the title of Silicon Valley godfather.

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

If we were to gather the qualities that can achieve great things in any field, what shape would we see?

Fortunately, this Silicon Valley godfather has slowly sketched the silhouette of these qualities for us, and his method of drawing does not carry any urgency or anxiety. On the contrary, while slowly understanding what it takes to achieve greatness, his words flow like the cool stream that enters this summer, bringing tranquility and introspection.

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

With knowledge and action, Loran

Original: How to Do Great Work
Author: Paul Graham

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

I initially wanted to create a guide that could be used in any field. However, I was also curious about what skills lead to great achievements. So while writing this guide, I discovered that this skill list has definite answers, and they are not encapsulated by the word "effort."

The following guide is for the ambitious only.

Decide What to Do#

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

In real life, you basically 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 hard 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 to find your goals is to practice. If you don’t know where to start practicing, just take 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. Don’t let others dictate your definition of "work" or "career." If one day you achieve a great career, it is likely that you are doing your own project. Although it may belong to a larger career map, you are the core driving force behind that part of the result.

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

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

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

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

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

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

To summarize, finding your personal project involves four steps: choose a field, learn enough to reach the forefront, discover gaps, and explore promising areas within them. This is what everyone who does great things does, growing from a creator to a practitioner.

The second and fourth steps require you to invest a lot of time and energy. Indeed, our efforts do not guarantee greatness, but from extensive experience, not putting in effort certainly leads to nothing. The premise of 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 the three most powerful sources of motivation. Sometimes, these three will gradually converge, and the strongest driving force comes from the combination of all three.

The ultimate prize is finding that branch that may grow out of the gap. You discover the cracks in the surface of knowledge, break them open, and then 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, 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 do not have the opportunity to experience or learn most other industries simultaneously. The worst-case scenario is that you start your true endeavors a bit late due to incomplete information.

The essence of ambition exacerbates this problem. There are two types of ambition: one is present before you find your point of interest, and the other arises from your interest. 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 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 people can guess correctly at once, but the rest will stumble and repeatedly research among many paths.

So what should you do when you are young and ambitious but don’t know where to start? First, you should not go with the flow, thinking that the answer will fall from the sky; you need to take action. There is no manual in this world that can peel away the layers for you; I believe you realized this when reading the autobiographies of those great people. Luck plays a significant role in finding the career you want to explore. Those great people often find their calling after encountering a benefactor or a good book, suddenly realizing what they want to do. So what you need to do is increase your chances of being favored by luck. The way to increase it 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 is truly studying 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 do.

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

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

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

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

Providing something for others also needs to follow the principle of interest. It is obvious that the stories that people want to read the most are the stories you want to read. I repeatedly emphasize this point because many people think about this issue incorrectly. They do not do what they want but instead create something they imagine is needed by a supposedly more mature audience than themselves. As long as you think this way, you will never return.

When you try to discover what you want to do, various forces will emerge to lead you astray: superficiality, trends, fear, money, politics, the wishes of others, influential deceivers, and so on. However, if you deviate from your true interests, you will become a plaything controlled by these forces. But if you firmly hold onto your interests, you