TIP773: How Systems and Simple Math Shape Better Investing w/ Kyle Grieve

You're listening to TIP. Did you know that over long periods, just a handful of stocks will account for the vast majority of a portfolio's return? And that's even if half of your investments fail. The winners can still make up for the losses and then some. Now that asymmetry results from power laws and convex compounding. And once you truly understand how these mathematical forces work inside of real world systems, it will completely change the way that you think about investing. In today's episode, we're exploring the mental models from systems thinking and mathematics that have had the biggest impact on my own personal investing approach. We'll look at things such as feedback loops, kill criteria, and the cone of uncertainty, and how these systems can be used to improve your thinking process. We'll examine how scale changes a business as it grows, how algorithms help you make more certain decisions, and how critical mass can propel a company into beneficial self sustaining mode. Then we'll shift over to the mathematical side of things, and don't worry. You won't need to pull out a calculator to follow along. We'll look at concepts like hidden compounding, power laws, randomness, and regression to the mean, and then we'll tie them all together so you can really understand just how these forces quietly shape your portfolio's long term performance. This episode is for investors who wanna think more clearly, whether you're trying to expand your mental toolbox, aiming to avoid common pitfalls, or looking for new ways to stress test your own reasoning. If you're someone who really values long term thinking, likes understanding just why things work the way they do, and wants an edge that isn't based on things like predictions or noise, then this episode is for you. Let's get right into it. Since 2014 and through more than 180,000,000 downloads, we've studied the financial markets and read the books that influence self made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Kyle Grieve. Welcome to The Investors Podcast. I'm your host, Kyle Grieve. And today, we're gonna discuss mental models from two very distinct areas, systems and mathematics. So my first introduction to systems was by reading Thinking in Systems, a Primer by Donella Meadows. That book really helped me develop a basic understanding of just how systems work. My biggest takeaway was just, you know, how these systems tend to work together and how small changes to one part of the system could cause a very massive change to outputs in other part of the system. And obviously, this could be a desirable or undesirable outcome. As I began to think more and more about systems, I came across another excellent book which was the great mental models volume three, Systems of Mathematics by Farnam Street. This book compiles numerous great mental models from these two broad areas of learning. While preparing for this episode, I also couldn't …