Reading Howard Marks' investment memos is up there with reading Paul Graham's essays. You just need to do it. Howard's latest is about "taking the temperature" of the market and I think you'll find the lessons invaluable for everything from equities to residential real estate.
Here's an excerpt that I liked:
We don’t say, “It’s cheap today, but it’ll be cheaper in six months, so we’ll wait.” If it’s cheap, we buy. If it gets cheaper and we conclude the thesis is still intact, we buy more. We’re much more afraid of missing a bargain-priced opportunity than we are of starting to buy a good thing too early. No one really knows whether something will get cheaper in the days and weeks ahead – that’s a matter of predicting investor psychology, which is somewhere between challenging and impossible. We feel we’re much more likely to correctly gauge the value of individual assets.
These are investing words to live by. Avoid your own emotionality and value the asset. If it's not cheap, don't buy it. If it's cheap, buy it. Then take a long-term view. It all sounds simple enough, but it's clearly not so easy. And that's why we have extreme highs and extreme lows in the market.
Eighteen months ago, everyone wanted to buy residential real estate. Today, prices are lower, but fewer people want to buy residential real estate. Part of this is obviously because of interest rates. But part of it is also just because of emotion.
Paul Graham just published his latest essay and it is a recipe for "how to do great work." I highly recommend it, but you should know two things: (1) it assumes that you're "very ambitious" and (2) it's quite long. It's possibly his longest essay.
However, this second feature acts as a kind of filter. Because if you do actually make it to the end, his assumption is that it says something about both your level of ambition and your overall commitment to doing great work. You are presumably not the majority.
As I read through it (albeit relatively quickly), I immediately started copying and pasting excerpts that resonated with me. Eventually I stopped this because there were just too many of them. But as a preview, here are some of the ones that I did pull out:
Four steps: choose a field, learn enough to get to the frontier, notice gaps, explore promising ones. This is how practically everyone who's done great work has done it, from painters to physicists.
Develop a habit of working on your own projects. Don't let "work" mean something other people tell you to do. If you do manage to do great work one day, it will probably be on a project of your own. It may be within some bigger project, but you'll be driving your part of it.
The educational systems in most countries pretend it's easy. They expect you to commit to a field long before you could know what it's really like. And as a result an ambitious person on an optimal trajectory will often read to the system as an instance of breakage.
The trouble with planning is that it only works for achievements you can describe in advance. You can win a gold medal or get rich by deciding to as a child and then tenaciously pursuing that goal, but you can't discover natural selection that way.
To the extent you can, try to arrange your life so you have big blocks of time to work in. You'll shy away from hard tasks if you know you might be interrupted.
There may be some jobs where it's an advantage to be cynical and pessimistic, but if you want to do great work it's an advantage to be optimistic, even though that means you'll risk looking like a fool sometimes. There's an old tradition of doing the opposite. The Old Testament says it's better to keep quiet lest you look like a fool. But that's advice for seeming smart. If you actually want to discover new things, it's better to take the risk of telling people your ideas.
People who do great things don't get a lot done every day. They get something done, rather than nothing.
You really should read the entire essay, though. It's worth it.
Back in the old days, and by the old days I mean the 1980s, there were a handful of ways in which you were likely to get rich. You either inherited it, or you made it in oil or real estate. The Forbes list of the 100 richest Americans was first published in 1982 and, at that time, 60 of the people on this list had inherited their wealth. Of the 40 new fortunes on the list, about 60% were primarily related to oil or real estate. If you couldn't inherit your money, these two industries were a good place to start.
But as Paul Graham explains in this recent essay about "how people get rich now," this is no longer the case. On the 2020 list, there were 73 new fortunes, but only 4 stemmed from real estate and only 2 stemmed from oil. As you might imagine, today's biggest driver is what we call tech and, more specifically, it is people founding tech companies (there are also a couple of examples of early employees doing very well). Of the 73 new fortunes last year, approximately 30 came from tech, including 8 of the top 10 fortunes on the list.
Given how many people are starting new companies today (it has become easier and cheaper) and given how many of these companies are quickly growing to big valuations (things are scaling faster), it is perhaps tempting to think about this period of time as being entirely unprecedented. Never before have we seen so many young people getting rich by starting their own company. And never before have we seen such inequality.
However, Graham argues in his essay that this period of time is the default. What we saw in the second half of the 20th century was actually an anomaly. Indeed, if you go back to the end of the 19th century, the richest people in the US were mostly people who were starting their own companies and taking advantage of new technologies, such as that of mass production.
His claim is that for the most part it wasn't really viable to start your own company in, say, the 1960s. Instead, most people simply went to work for a big company that had some sort of oligopolistic positioning in the market. And it turns out that was pretty good for maintaining a strong middle class. Less people were getting fabulously rich. I'd like to see some more data points around entrepreneurship and wealth during this era. But regardless, I think it's pretty clear that the dominant sources of wealth have changed.