Long-term holding of good assets has two aspects: one is earning money within the realm of understanding; the other is that money is often likely to be non-linear, exceeding everyone's initial understanding.
整理：E2M Research
This content is compiled from E2M Research's space every Friday (Hypothesis and Refutation).
(Hypothesis and Refutation) This book has brought much to several speakers from E2M Research. We hope that reading is not limited to just reading, but can also apply its good thoughts to practice and even validate them through our own investment cases.
As we believe: many things in the world are not strictly black and white; many 'third-party thoughts' exist, encouraging us to continuously seek better explanations, encouraging everyone to boldly hypothesize, actively refute, and carefully verify in real life.
Recently, the market has been performing well. How to hold good assets long-term? How to buy back heavily after selling? This is worth discussing again. The guests also shared their industry experiences for discussion.
Complete audio:
https://www.xiaoyuzhoufm.com/episodes/673b43ef43dc3a43879d5cb8
Key Points Selected
Divine Fish Twitter @bitfish1
The dimensions of good assets are based on current understanding to make long-term judgments. If their development curve and future growth trends and key inflection points are already met at present, they will be placed in the basket of good assets for comparison with other assets.
The essential question is how to hold good assets long-term after discovering them?
Hold on; the core point to emphasize here is not on the rational level but more on the psychological level. Therefore, we need to establish some ways and rules while still rational to ensure that we can maintain relative rationality even when in a state of FOMO.
How to build this framework?
Here, we must mention the 'Position Management Method', which divides the asset pool into four pools:
The first is a cold wallet, mainly used for storing coins, creating various obstacles that make it difficult to access. Core assets are placed inside, accounting for about 60% or more of the assets.
The second is a warm wallet, which is mainly used to manage assets and can provide cash flow relatively safely and steadily, allowing us to maintain a relatively stable mindset in extremely pessimistic situations, accounting for about 20% to 30%.
The third is a hot wallet, mainly used for consumption, experimenting with speculative assets, and trying out products, providing experience to judge whether it is a good asset in the future, accounting for a few percent of the asset scale or even less. If this wallet indeed grows in scale due to speculative consumption, it should be immediately moved to a warm wallet or a corresponding cold wallet.
The remaining one is the fiat currency wallet. There is a small principle here called the 4% principle: 4% of the asset scale in the fiat currency wallet equals the annual expenditure. Assuming that the previous wallets encounter an unexpected situation, the interest from fixed deposits or government bonds generated in the fiat currency wallet can basically cover daily expenses. This can essentially be seen as living reserves and isolated assets.
Zhen Dong Twitter @zhendong2020
If one currently holds Crypto assets or Tesla, more understanding is needed regarding models like complex system evolution theory, non-linear growth, and innovation diffusion. Because in today's internet age, the speed, efficiency, and cost of information or knowledge dissemination are exponentially greater than they were decades ago.
Understanding good assets requires a certain foundational knowledge first. An important reason that prevents many people from holding good assets is that most people currently have a misunderstanding of long-term holding, or the biggest enemy of holding good assets long-term is the enthusiasm for short-term trading. Many people confuse long-term holding with short-term trading.
What did Popper say is most important? The most important thing is more rational humility.
How to analyze what constitutes a good asset? We should continuously make positive expected, good investment decisions, which have long-term compounding effects, rather than engage in repetitive, useless work of simply screwing. Humility means knowing that mistakes can happen, and once one realizes a mistake has been made, one should continuously correct and adjust.
Odyssey Twitter @OdysseysEth
There are two key points to long-term holding of good assets: one is understanding, and the other is long-term. Understanding can be divided into two types: one is rational understanding, and the other is emotional understanding. How is this understanding formed? The things constructed when buying will also be effective on both cognitive and emotional levels when selling. How to construct this understanding? This is the issue of how to understand good assets.
The process of cognitive construction will have several points that will all play a role when selling.
The first point is not to ask about those early assets, because they have never crossed the critical point. If one cannot understand it from the beginning, naturally, one will not touch it, and later will not sell it. If it has already crossed the critical point when entering, the focus will be sharper when looking at it again, and the understanding will be very deep.
The second point is to think and verify the monopoly from multiple dimensions. If one buys due to monopoly, the reason for selling will only be the disappearance of that monopoly or the emergence of a better monopolist. This symmetry can be constructed. Understanding the process of monopoly will enrich our understanding of user needs and the overall potential market, etc. This process will lead to a large amount of rational and emotional construction.
Long-term holding of good assets has two aspects:
One aspect is earning money within the realm of understanding. If one has clearly thought out the long-term product roadmap from the beginning and has achieved that roadmap, should one sell? Not necessarily. Some people can indeed earn this part of the money, but those who are less lucky may not earn money outside of their understanding.
On the other hand, money is often likely to be non-linear, exceeding everyone's initial understanding. As investors, one must be able to handle this part of surprise and not try to predict the future with the limited rational brain of ten years ago, but instead be able to construct this asymmetry to embrace the benefits of the future. How to embrace the benefits of the future? After acquiring assets, one must recognize their characteristics, acknowledge that they are good assets, and believe they can exceed expectations.
How to buy back heavily after selling? In fact, it's more of a psychological issue, and it also includes cognitive issues. Cognitively, it means if one adds to their position with the monopoly, then on that psychological basis, one will naturally not care whether the previous price was high or low, as adding to the position with the monopoly has already decoupled from price. The key to buying back heavily is that one has previously sold, and for almost everyone, correcting a mistake is very painful. Many people think investing is merely about investment, but it is not; investing inherently carries a desire to prove oneself or to solve current life troubles. Often, to make good investment decisions, one must first resolve this layer of desire or the underlying psychological issues themselves. If one is initially swept away by a strong desire, it becomes very difficult to make rational investment decisions.
Q: Why establish a position management system?
I have kept track of some significant decisions I made in trading, and my win rate was only a little over 40%, not exceeding 45%. Therefore, later on, I would write decision logs when making major decisions, analyzing various situations at the time and my emotions, and then analyze my understanding of the world's development, my judgment of the future of the event, why I made such a decision, and whether I would regret it, and then review it after six months or a year.
In the end, one will find that the world is unknown. Our modeling and rationality about this real world are limited, and during the modeling process, it is essential to maintain an open mindset and brain.
Some very painful mistakes are essentially the information that this real world gives us, which often determines whether a person can grow. The key lies in receiving real and effective feedback and information from the real world and not getting trapped in those emotions, and being able to review, think, and iterate afterwards. (Divine Fish Twitter @bitfish1)
Q: Which is harder, discovering good assets or buying back after selling?
Finding good assets is inherently more difficult than heavy investment. Many people around me who hold Bitcoin sell after making some profit, and very few can buy back after selling. Therefore, there’s no need to talk about heavy investment again. Heavy investment means putting a large proportion of assets into an asset type; this itself is a challenging task.
When I bought Tesla, although I had already researched a lot, I still found it difficult to buy when it actually came down to it. I could only buy an absolute value, so I realized that human nature is a bit unaccustomed to such large numbers. This includes the pressure I felt from the absolute value growth of chips when playing Texas Hold'em. Although it didn’t seem like much from the perspective of asset proportion, that absolute value would still involuntarily compare with ordinary expenditures.
The more challenging aspect of buying back heavily after selling is facing the error. Admitting a mistake is not just about recognizing the mistake; it is a process that requires reconstructing many underlying logics. Secondly, many times, the attitude towards errors is also an issue, as sometimes it is associated with personal image, making one feel embarrassed to admit mistakes. Some ordinary people may see making mistakes as shameful, but many smart individuals believe that lacking the ability to correct mistakes is even more shameful.
Popper's scientific philosophy framework is also an antidote, allowing us to understand that humanity progresses through these errors. The only means of creating new knowledge is through hypothesis and refutation, where erroneous hypotheses are eliminated, and the remaining hypotheses are relatively correct. This means that the process of making mistakes is not only inevitable but also our sole path to discovering new knowledge. (Peicai Li Twitter @pcfli)