YouSaid · the spoken record

Christopher Cole

lines on the record: 57
first: 2016-11-29
most recent: 2016-11-29
sittings or episodes: 1
sources: podcast

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“All strategies that they work most of the time and then experience really large drawdowns when they don't work. And I think very few people are exposed to the opposite. And if most people's portfolios tend to be 97% short convexity and maybe 2% to 3%, if that long convexity, and I think a lot of people found that out the hard way during the financial crisis or during other risk-off periods. So convexity investing is about finding exposure to small bets that have small negative payouts or structuring investments to try to have neutral to slightly negative payouts that have extreme payouts in periods of dislocation or change.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I tend to think about the world in terms of there's so many different investing strategies. But if you were an alien that came down from outer space and you just simply looked at their return streams, it would tend to fit into one of two camps, either long volatility, long convexity strategies, and short volatility, short convexity strategies. Short convexity strategies have a positive payout usually, and then large, sometimes exponential declines occasionally. And then long convexity strategies are the opposite. You have a small payment, or you're trying to stay neutral, but small payments, and then occasional large gains. And I think a lot of people don't realize that if you take things like not all these asset classes are bad, of course people have to have exposure to things like credit and long equity exposure and value investing. It's not necessarily a value judgment on short convexity.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“Someone's afraid to go talk to an attractive or nice girl. Just a very small linear loss, a small linear loss, which might simply be pride, or a small linear amount of time, with the potential exponential gain of maybe meeting the person you'll spend the rest of your life with, or maybe just meeting someone who might be really amazing that could be even a good friend. That's a perfect example or a simple example of an exchange of linearity for nonlinearity. But we can use even more complex examples the idea of meditation, exercise, spending time learning to expand your neural connections. It takes a small amount of linear effort to produce massive nonlinear gain over long periods of longer periods of time. All are great examples.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I think there's a myriad of different examples. Health and time are your most valuable assets. I think in my paper I talk about the idea that Warren Buffett's worth $66 billion, but he's also in his late 80s. And I always ask people, would you switch places with Warren Buffett? And almost nobody says yes to that trade. Everyone says no. Well, how much do you value your time then? I mean, your time is valued in the billions. And your health is valued in the billions. So how do you maximize both? How do you make sure you're getting the most out of that? It means spending your time in ways that make you happy. It means spending your time around people that make you grow. It's about observing healthy habits. And it's about taking small risks that have big payoffs. Sometimes this is funny. I mean, it's a trite example, but I'm single, and sometimes I'll go out with my friends. And you see someone out there.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think a lot of times life, which can be analogous to markets, is about how do you take this linear concept of time and extrapolate it into nonlinear satisfaction in your daily life. And then from that, there's actually the idea of long convexity trading as a market strategy that does the same idea in markets.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's go back to the ticker idea. That's really interesting. I mean, for a long time, I wanted a watch that counted time to my theoretical death, as morbid as that might be. And actually there was these guys actually kick-started one. So I was on the list to get it. But I like to think of human life almost like an option. We have nonlinear payoffs, but we're linearly exposed to time. So an option is a financial instrument that you have long convexity, this myriad of different possibilities, but there's a limited amount of time that the payouts can occur in. And as you get closer and closer to the expiration of that option, there is a decay factor. It's much like a human life. So we experience time in a linear fashion, but we experience emotion, happiness, nonlinearly.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source
“It is a watch that actually counts time to your, it counts time backwards to your death. So in many ways, some people might find that idea very morbid. But actually I find it quite life-affirming because it says you only have a finite amount of linear time in your life. This watch is oftentimes letting you know you better use that to the best possible way.”
2016-11-29 · Invest Like the Best · Christopher Cole – Small Bets, Huge Payoffs - [Invest Like the Best, EP.13] · IDENTIFIED FROM THE TRANSCRIPT · source