Sunday Briefing: On the Kelly criterion, SPACs, and communication

Sunday Briefing: On the Kelly criterion, SPACs, and communication

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Welcome to the Sunday Briefing newsletter where we share some of the interesting lessons in life, business, and investing that we’ve come across during the week.

Latest on Junto

One note was published on Junto during the week.

The Kelly criterion applied to long-term value investing. While commonly used in the world of betting and finance, the Kelly criterion is poorly understood. In this note, I explain how I think you should properly use the Kelly criterion as applied to long-term value investing. I also explain two mental models that are vital to know before you can fully appreciate what the Kelly criterion has to offer and what it doesn’t have to offer.

What we’ve been reading

How millennial investors lost millions on Bill Ackman’s SPAC. A relevant one to read after the Kelly criterion note about how position sizing can ruin a positive expected-return bet.

In retrospect, the psychiatrist believes “mob mentality” is at fault. “It’s how you can get caught up in something and not be able to separate yourself and think, ‘Is this actually the right thing, or am I making the right decision?’ Because you’re just so caught up in it.”

Communication is the job.

Saying nothing can often be even more damaging than saying the wrong thing. The people around us are so eager to understand the world around them that in the absence of true communication, they will attempt to find a signal in noise. None of us gets to control what others are hearing or how they are interpreting things. We can only control what we contribute to that milieu.

Quote of the week

Charlie Munger on independence.

“Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris – I wanted independence. I desperately wanted it.”

A thought

One key to successful investing is knowing when looking backward may do more harm than good.

Have a great coming week,
Oliver Sung

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