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black swans, the butterfly effect, and a perspective on life



August 23, 2009 – Comments (18)

Black Swan:  a rare, or once in a lifetime event, thats difficult or impossible to predict or forsee, which ultimately has a massive or even dominant effect on your life.

Butterfly effect:  changes, sometimes small changes, in chance and circumstance, that you might or probably do consider trivial at the time, can have a dramatic impact on the outcome of something

Well I'm not a philosopher, and I'm not a psychiatrist, and I'm not likely to be remembered as a particularily eloquent writer.  But for several days a thought htryingas veritably dominated my mind, and I feel compelled to write about it somewhere.  And i've chosen here as aside from a car forum or two, I don't post anywhere else.  And while as noted above, my qualifications to offer thoughts may not be world class, you are reading a thought from a guy who's gotten slapped in the face by about 3,000 girls while trying to flirt, and who pnce dated the entire local hooters staff (and I doubt anybody else ever did that), who's failed in glorious fashion with a handful of businesses and made it reasonably big with a couple, and through it all raised a kid who's probably my best friend.  And, I've (nearly) tripled my money managing it myself in this big bear/bull/bounce market.  So maybe (and maybe not) I am able to come out with a thought worth consideration.  Read the thought and you decide.  Plus i'm now bald, and thats got to count for something.  lol

What I want to say has precious little to do with investing.  Here are my current thoughts on stocks.  If you want to hedge, see if you can find shares of levered bull ETFs to short (fullness of time thats basically a sure win, short term it could get ugly if the market surges or sell covered calls.  My favorite buys are RJET, high yielding BDCs (ARCC, PNNT, PSEC, HTGC, FSC, AINV, ARCC is my #1 fav of those), MGM, and BZ if/when it pulls bcak to the $2s.  This thought, though, has little to do with investing.  

Think for a second about life as ... as choosing doors.  You face many doors at any time.  One door might be saying damn the man and smoking alot of pot, hating society.  One door might be starting a business.  One door might be becoming an alcoholic and lamenting your very birth.  One door might be working on your social skills and trying to throw the best party of all time, 100 nights in a row.  One door might be a 4 year degree, buy and hold, 2.3kids, andeverything else.  One door might be backpacking through europe and asia trying to bond with the locals.  One door might be the corporate ladder, kissing fanny, worrying more about what you say to your direct superiors than what you actually accomplish.  Whatever, many, many doors.  Infinite doors.

We make choices, theyd efine our lives.  That's no real mystery to anybody who's lived or watched others live.  But the thought that I think might be worth reading is this:  we choose the doors, but ultimately we really have no idea what lies behind them. 

For example, I once chose the social life/party door.  I grew up in a very strict fam and rarely or never went out in high school, I got to college painfully shy, and I guess the bright lights of pretty girls, cool guys, and big parties just seemed alluring.  Its fun making friends and breaking things.  I spent a couple years working out dealing with the shy thing, and frankly I think I may have co-thrown a couple of the best parties ever thrown.  It was everything we ever thought it could be.  Pretty girls, cool friends, broken things.  

One day, we threw such a party starting at noon or so with a BBQ.  At about 4 or 5 I decided  to take a nap on the couch, as we planned to throw a bash that evening.  I woke up in the gloaming hours, with the sunset shining in the balcony door.  To my left was some girl i'd never seen before, wearing white shorts about an inch long and a pink shirt.  She looked alright from that angle, I stood up, she said hi, and I almost passed out.  I spent the next 2 hours wondering who and why she was, I forgot for those 2 hours that hooters had ever even been invented, and frankly, I don't think that even the owner of the local hooters would have cared about hooters girls just then if you follow, only to find out she was dating some kid named steve.  2 months later she was dating me.  A few months after that she forgot to take her pill and we wound up parents.  Cut a scene, and our son wound up living with me.

So I'd chosen a door, right?  The party door, it was a hell of a door, I can't imagine not choosing it if I could go back to the same place in life, it was so clearly the shiniest door.  Study?  Work out?  Why, when that much fun is everywhere at that time in your life?  But the story doesn't end with pretty girls in white shorts or the hooters staff being over 5 nights a week or keg stands or knowing 1000 people or any of that.  See, for a time choosing that door got me exactly what I'd planned, but hten it left me a single parent.  And thats not what I planned.  Who could have seen that coming?  Rationally, one could argue that its of course a possiblity, but its not like I could have epxected it after a collegehood of wild parties, bad hangovers, and bartering with professors to give me an "A" if I got the best grade on the final after not showing up at class all semester. 

That is the black swan.  The event you didn't, and maybe couldn't have forseen.  The last couple of days I've been lost pondering what exactly its impact on my life has been.  And I think its broader than I have realized.

So I wound up a single parent, right?  Not too rare, that.  But I have no family here, I have no finished education, and I had no meaningful job history.  I had an absolutely undeniable ability to throw epic parties, but its tough to make money from that.  So, I had no way to make money but waiting tables and tending bar.  But with a boy to put to bed every night, its not really practical to tend bar and throw cool parties, is it?

So I chose another door.  I started a business.  I didn't see another possiblity, ... with a kid to provide for and a generally ambitious nature I just did it.  I failed.  I failed again, I failed again.  And once more. And I wound up with all the tips I'd saved gone (i'd thought they'd be enough to start teh biz).  And high 5 figures of credit card debt (all cars maxed out).  But it was the early 2000's, start of the credit bubble.  Weekly or monthly new pre-approved cards would show up.  I maxed them all out, and then started paying old cards payments with the new cards.  In the end, we had 100's of thousands of dollars of debt, my partner and I.  Much of it at 20+% interest.  We'd tried to get a normal loan, but the SBA told us to get bent because we were white and male, Wells Fargo told us to get bent because we weren't already rich, so we took the credit card route, it was the only one we had.  We wound up working bar jobs + the biz to augment the ever-growing mountain of debt.

It was horrible, to put it briefly and in a way that doesn't begin to do justice to the feeling of facing your own demise. Our next 2 biz's took off, one violently.  Thats happy.  But ultimately, through those years of failure and debt-wracking hades...  I couldn't quit.  If i hadn't been a parent, I would have quit.. for the last 2 days I've thought about that.  If I could have gotten a bar job full time... I don't doubt that I would have.  I could have stopped wracking up debt and quickly paid it down.  I could have gone to cool parties and met cool people.  But I couldn't, I had a son to put to bed every night.

So I worked 10 hours a day (day care hours) on hands-on things and 4 on email/computer after he went to bed.  I had no choice but to try to plow through it.  

Net outcome?  Sold a few businesses at for-the-record-books multiples...  after working 100 hours/week for a few more  years (same pattern) once they took off.  

And thats a butterfly effect.  Who could have seen that becoming a parent could lead to that path?  A path, ultimately, of a very high elvel of success?  But without the parent thing, I've come to conclude that the success thing is really not likely to have happened.

I chose the party life, I chose that door.  It ultimatley led to many years of less party and social time than most people will experience.  Like none, ever.  Work, parenting, work.  Every day, for years.  Didn't see that coming, did i?  And that in turn led to the surreal exitense I find myself with today.  In a way I can't believe anybody could have seen.  

So the black swan and its impact butterflies into something surreal...  

And that story is brief.  There is no limit to the black swans and butterfly effects in our lives.  In my life, or probably in yours  We can choose only the door, we ultimately have absolutely no idea whats behind it.  Behind my party door lied the hooters staff...  and years of being a grossly overworked hermit.  No way to know.  Behind the hermit business committed parent door, ultimately, lied something completely different yet again.  On and on.  I wouldn't even be here if my dad hadn't once disconnected the battery in a jeep, but thats yet another swan/butterfly story.

We choose the doors.  Ultimately, we have no idea whats behind them.  If i hadn't drank that 10th drink some night or other, maybe i'd have still been sober enough to think I could have driven.  And maybe i've had died in a car crash.  If you married some very nice girl/boy just yesterday, maybe that will result in you going to lunch with them next week.  And maybe a semi will run a light and that'll be curtains for you.  Randonm events caused by things not even realted to them (butterfly effect).

We choose the doors.  But we don't konw whats behind them...  probably whats behind them is a black swan, something you could not possibly have forseen.  And, ultimately, I think a great deal of our lives is defined by how we react to the black swans.  

Life is a series of choices, and then reaction to the unpredictable and unforseen consequences of those choices.  

It is how we react to the black swans that defines our time here, in the end.  It is the doors we choose that define what those black swans are, but frankly there's no way to know what the birdie is going to be when we choose the door.  Choose doors as well as you can ...  and look at life with a "come what may" attitude, not a checklist_34 "I'm gonna control my destiny" attitude.  That attitude has always gotten shoved right back down my throat, and i've always been forced to eat it.  You don't control it... you're not behind a steering wheel, you just have the ability to guide a crashing plane ever so slightly.  aim for water, swim towards land, figure out what you have to do.

Recently, ... another Black Swan may have entered my life.  I won't bother posting about the details here...  it really doesn't matter.  Something I couldn't possibly have forseen or predicted, and it threatens to rennovate my life yet again.  Just as I thought I'd come to a point where I had it all worked out.  

So be it.  I hope I find the energy to react properly once again. 



18 Comments – Post Your Own

#1) On August 23, 2009 at 4:48 AM, checklist34 (98.59) wrote:

what in the worlds come all over me, i ain't got a chance, not one in three.  aint got no rap, aint got no lines, but if you give me just a minute i'll be feeling fine - ZZ Top

i've held it all inward, god knows i've tried, but its an awful awakening in a country boys life, to look in the mirror in total surprise, at the hair on my shoulders and the age in my eyes - Waylon Jennings

I wish i'd have just gone all in on ASH at hte bottom, which I thought about doing a time or two, oh well - CL34

Come what may... - wisest guy ever

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#2) On August 23, 2009 at 4:49 AM, JibJabs (87.97) wrote:

You seem to be enduring an existential crisis of sorts. Good luck.

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#3) On August 23, 2009 at 4:54 AM, checklist34 (98.59) wrote:

on a side note, my portfolio is:

15% BDCs

20% insurance companies

15% chemical companies

8% vacation companies (cruise liners, mostly RCL, casinos, etc.)

7% other financials (banks, blackstone, etc.)

7% out of favor commodities via stocks rleated to them (silver, aluminum, nat gas)

7% airlines 

8% paper + building products

the rest is varied, newspapers being a respectable part of it.  Alot of i am way up on and not really interested in buying more of... which is a fascinating situation.  Thats why god invented hedges.  :)

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#4) On August 23, 2009 at 4:56 AM, checklist34 (98.59) wrote:

thanks jibjab.  existential I can't speak to, and crisis is always a relative term, but something is afoot that could prove profound.  we'll see how I can handle it.  life rarely fails to provide change.  :)

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#5) On August 23, 2009 at 8:36 AM, JerseyShoreGirl (< 20) wrote:

CL34 ... LOVED YOUR POST .. It totally reached me and inspired me .. Thank you!  .. I'll post more later, but in the meantime .. this song came to mind about Black Swans

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#6) On August 23, 2009 at 11:56 AM, awallejr (35.54) wrote:

With your portfolio breakdown I am surprised no oil related holdings (though you have the anti oil one in airlines).  Advantage of oil is it plays two ways.  For the inflation camp and for the recovery camp.  The 2 I hold in real life are BP and ATPG.

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#7) On August 23, 2009 at 2:12 PM, UltraContrarian (30.71) wrote:

Good luck with your life and your stock portfolio.  That doesn't look very good to me (too much US exposure, too many high debt companies) but it has certainly worked the past few months.

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#8) On August 23, 2009 at 2:35 PM, VintageCat (< 20) wrote:

FWIW, we couldn't be more opposite except for sharing a "self sufficiency" streak and possibly age grouping.  I absolutely get what you are saying. Thanks for sharing.   

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#9) On August 23, 2009 at 2:52 PM, Rebkong1 (< 20) wrote:

as roman emanuel said " never waste a good crisis" ..while i can't for the life of me believe i am quoting this guy (for his intent and reasoning for saying this phrase isn't noble)...however , there is some truth fundamentally for all of us in that statement...


for as you have stated so eloquently above

"It is how we react to the black swans that defines our time here, in the end"  


we will all have hardships and dilemmas  in our lives..whether self-inflicted (choosing of a door) or is how we deal with them that defines us ultimately in this world and in the eyes of your Creator...Reading this piece made me think back on how many doors i have opened wrongly and correctly and the effects they have had on my life...but what sticks out to me today is that some of the things that i have looked back on for the most part of my life as regrets (or wrong choices) have made me who i am today...for better and for worse...and i feel a sense of gratitude today for having made of these choices now ..b/c the ultimate outcome (a better me) and subsequent experiences (some quite consequential and hard)  have made me realize that through some of the hardest times in your life...some of the greatest opportunities can arise..


its not how you start but how you finish



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#10) On August 23, 2009 at 10:39 PM, anchak (99.90) wrote:

Checklist ...Beautifully written and a moving piece!

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#11) On August 26, 2009 at 12:52 PM, skeptic86 (42.57) wrote:

cheers checklist.

i always try to remember that life is an adventure and that there are only a few things that really matter in the end, if you're happy and if you made people around you happy. The only reason i play this money game is bc everyone else does. And if i win, i get to share my winnings with the people i love. and if i lose, atleast i can go hang out with the lossers and talk about how we almost made it.    

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#12) On August 27, 2009 at 8:19 PM, checklist34 (98.59) wrote:

jerseyshore, thanks much, I am glad you got something out of my late night ramblings.  :)

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#13) On August 27, 2009 at 8:25 PM, checklist34 (98.59) wrote:

awall, I would love to own some oil stocks from their bottoms.  I had been in a couple...  but about a week before the march bottom I had a strong feeling that the best play to make in the next 1-2-3 years would be betting against the tide of mark-to-market accounting and the immense impact it was having on financials.  So financials became the biggest holdings type (still nearly 50% in financials... but not quite). 

I have often lamented my lack of exposure to oil, and I completely think that moving up the "food chain" to commodity producers/miners/etc. is a good idea here.  But i'm so far up on basically all of those financials that its worth 20% to me to hedge them up and wait it out (tax savings, cap gains -vs- income).  Also, there is room to move still in some of those financial names, and ohters have tremendous dividends.  

My biggest commodity holdings are in nat gas and aluminum, both really out of favor.  My single biggest commodity producer holding, larger than all the rest (and forgotten in the calculations above I fear) is TCK, which is coal and copper and more coal.  

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#14) On August 27, 2009 at 8:28 PM, checklist34 (98.59) wrote:

ultracontrarian, if I was building a portfolio today it definitely wouldn't look like that.  that was NOT a recommendation or a guideline, just an observation.  But to be honest at the march bottoms thats exactly what I'd do if I could do it again, except I'd be even more concentrated.  I had one great idea, and its paid off handsomely, but lord what could have been...

I do not subscribe to the buy-china theory of foreign investing at all, however.  Their market is not as cheap as ours and I think its very likely that rumors of our demise have been greatly exxagerated.

good luck!

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#15) On August 27, 2009 at 8:30 PM, checklist34 (98.59) wrote:

hey vintage, I don't think I followed the "more opposite" comment?  thanks for the comment. :)

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#16) On August 27, 2009 at 8:33 PM, checklist34 (98.59) wrote:

rebkong:  "its not how you start but how you finish"

indeed.  and not where you intended to get, but where you actually got.

thanks for the thoughts

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#17) On August 27, 2009 at 8:34 PM, checklist34 (98.59) wrote:

thanks very much, anchak!

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#18) On August 27, 2009 at 8:41 PM, checklist34 (98.59) wrote:

pv355, you are really onto something there.  at the end of the day amassing wealth really only benefits the quality it can bring to our lives, and ultimately the quality in our lives is more than less the people around us.  thanks for the thought  :)

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