🧠 The Power of Quitting

Friends,

Annie Duke’s new book, Quit: The Power of Knowing When to Walk Away, is a great read. The thesis: to live a better life, we need to quit most of our activities sooner.

But, there’s an important exception to this rule. Duke spends a section talking about taxi (or Uber) drivers. Normally, they work until they’ve earned a set amount of money, and call it quits.

According to Duke, there’s a smarter approach:

On slow days when fares are low, drivers should quit sooner.
On busy days when fares are high, drivers should work as long as they safely can.

In other words, the extra revenue gained on busy days more than makes up for revenue lost from quitting sooner on the slow days. And because there are more slow days than busy days, the drivers who adopt this strategy would have more free time and make roughly the same amount of money.

This lesson maps perfectly on investing: many investors hold a stock until they get a certain return, and then sell. But they’d be better off learning from the taxi drivers:

If a company’s thesis is broken, quit (sell) it immediately — regardless of returns.
If a company is consistently executing against its mission (and doing so profitably), hold onto it for dear life.

You only need to own two or three mega-winners in a lifetime to accomplish your financial goals. Take the rest of the time this approach yields to focus on what really matters in your life.

Wishing you investing success,

– Brian Feroldi, Brian Stoffel, & Brian Withers

P.S. Our new course Valuation Explained Simply starts in 6 days! Use the coupon code LASTCHANCE200 to secure a discount.

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We love investing in founder-led businesses. That’s because founders tend to be passionate about the problem that the business is solving, which gives them motivation to succeed that extends far beyond money. This article by Bain & Company explores that idea in details and backs it up with data.

One Twitter Thread:

When 10-KDiver posts, we read. He recently knocked it out the park with a thread that explores the concept of Gambler’s Ruin in detail.

10-K Diver

@10kdiver

1/

Get a cup of coffee.

In this thread, I’ll walk you through “Gambler’s Ruin”.

This is a classic exercise in probability theory.

But going beyond the math, this exercise can teach us a lot about life, business, and investing.  pic.twitter.com/1pIz9e98h2

January 1st 2023

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One Resource:

One of the fastest growing accounts on Fintwit is Compounding Quality. This account was created by anonymous fund manager who consistently shares high-quality investment knowledge with the world (Bill Ackman recently retweeted his content.) I recently subscribed to his free newsletter and can confirm that it’s just as high-quality as his Twitter account. Check it out — it’s well worth your time to subscribe.

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