About Jonathan Bales

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You probably know a ‘maverick’ as a nonconformist, but the original definition is an unbranded calf. I like the term ‘unbranded.’ It conveys a lack of ownership. Mavericks are known for being independent, unconventional, different, contrarian…but more than anything, they’re free.

In choosing a title for this newsletter, I wanted something that demonstrates core principles I believe have helped me find success. Whether you define ‘success’ as building wealth, finding happiness or, as I do, becoming free, my hope is that I can tell some cool stories and share some insights that you might find valuable in developing your own set of ideals that govern how you unlock whatever you characterize as a successful life.

So what’s in a title? Here’s what Lucky Maverick: The Art and Science of Betting on Yourself means to me (with the core principles that govern how I think in bold).

Lucky

It would be foolish to overlook how lucky I’ve been. It’s easy to attribute successes to skill, but the truth is there is far more luck and uncertainty in life than almost anyone realizes. That doesn’t mean you’re powerless, though.

  • Principle #1: See the world in terms of probabilities.

You can increase how frequently you experience positive variance—good luck—by learning how to 1) shift the probabilities in your favor and 2) take more smart risks such that “luck” becomes inevitable.

In poker, there’s a saying that the best players also get the luckiest. While no one has any more inherent luck than anyone else, the sharpest players do tilt the odds in their favor to the point it certainly seems like luck is on their side.

Just as the top poker players work within the confines of the game to create an edge for themselves, you must work within the rules of whatever “game” you’re playing—whether it’s to make money or lose weight or whatever—to bend the odds in your favor.

As you become adept at taking smart risks, what many perceive as “luck” naturally follows. The entrepreneur who needed everything to go his way for his latest venture to succeed will be labeled “lucky” by most, but those who know about his four prior failed business attempts know he didn’t succeed because of luck; he succeeded because he kept taking shots.

  • Principle #2: Divorce process from outcome.

Dealing in a world filled with uncertainty in which we’re doing our best to estimate probabilities, it’s imperative to know we can be right (or have things work out) for the wrong reasons and wrong (or have things not work out) for the right reasons. If an entrepreneur makes a miscalculation that could put the company out of business, it’s a poor decision regardless of what happens after that.

Over the long-term, you need to see results. A sports bettor who loses over a period of a few years just isn’t profitable, but no conclusions can be drawn from the results of a single bet. The same is true in other aspects of life, and there’s way more variance in short-term results than people believe.

To help separate process from outcome, you should use expected value…

  • Principle #3: Think about most problems in terms of EV—expected value—which is Probability x Payoffs.

This means worrying not only about the odds something happens, but also what you stand to gain or lose when it does occur. The payoffs are an overlooked source of “good luck.”

Payoffs change the name of the game. If I bet on the roll of a die and get paid only when a ‘six’ comes up, it might be an awful gamble if I’m betting straight up or the bet of a lifetime if I’m getting paid, say, 10-to-1 (meaning for every $1 I bet, I get $10 when a ‘six’ is rolled). The EV in the latter scenario is 16.7% x $10) + (83.3% x -$1) = 0.837, meaning if I were to make this bet 1 million times, I’d earn around 84 cents per roll for every $1 bet.

The EV before and after the roll of the die is 84 cents. Most people think of the value of the roll after the fact as either +$10 or -$1. You have to avoid this trap. The value is 84 cents no matter what happens. The result doesn’t change the EV. It has zero impact on the quality of your decision to make that bet.

This isn’t just academics. In reality, many situations—the most lucrative of life’s opportunities, in my opinion—possess way more luck than people realize, meaning they’re closer to a coin flip or roll of the dice than it naturally seems. As such, you see the equivalent of intense analysis of a coin’s properties and how weighted it is toward heads and what the air conditions are at the time of the flip—all in an effort to improve prediction accuracy of a coin toss to 50.1%--with little regard given to the payoffs.

In finance, there’s a phrase “What do you win if you win?” You can’t possibly calculate EV, you can’t possibly make smart mathematical decisions, you can’t possibly expose yourself to opportunities to get lucky, unless you understand both “wins.”

There’s less competition in predicting payoffs, which leads me to the fourth principle.

  • Principle #4: Be a big fish in a small pond.

Once you reach a certain skill level, it becomes increasingly difficult to move up the ranks. You’re best off trying to reduce your competition—become a big fish in a small pond—and there are a variety of ways to do that.

One is cross-pollination, or the intersection of your ideas/skills. If you’re a good guitar player and have awesome ancient history knowledge—say the top 1% in each area—then you’re in the top 0.01% (1-in-10,000 talent) when combining those things. I mean this skill might be kind of useless, but if you can find someone to pay you for a power ballad about Socrates, you’re fucking set.

Another way to be a big fish in a small pond is to be early. When you’re first to a new niche, you don’t need to be that good. Would you rather have immense knowledge of the intricacies of cryptocurrency trading today, or have just bought a bunch of Bitcoin in 2010?

Those who limit their competition are reaping more of the fruits of their labor, i.e. maximizing payoffs. In this way, ‘lucky’ and ‘maverick’ are interconnected; being an independent thinker limits competition and maximizes the extent of the rewards you reap from luck.

  • Principle #5: Admit how little you know.

This isn’t just about being humble. It’s fundamental to getting lucky, to benefiting from uncertainty—what Taleb calls “antifragility.”

The “unexpected” happens a lot more than people appreciate, and you can put yourself in a position to gain from chaos—which offers life’s greatest returns—only by being truly honest with yourself about how shitty you are at predicting the future, particularly rare events.

The easiest way to become more realistic with your ability to assess reality: think about what you believed to be true and how you acted five years ago. I don’t know about you, but I was a fucking moron. I had a purple mohawk at one point because I thought it would help me get girls.

By admitting you don’t know as much as you think, you can bet on yourself (and others) being wrong—that unexpected and unpredictable things will happen in your future—and get “lucky” from their occurrence. This is the opposite of fragility—the antifragile.

A trend you might be noticing here: you don’t necessarily need to better predict the future to get lucky. In fact, that’s the most challenging path.

Maverick

I crave freedom, even more so than happiness. Any money I make is seen as a tool to unlock freedom. Mavericks are free because they think differently, but also able to think differently because they’re free. To attain ultimate success, you have to be comfortable thinking for yourself.

  • Principle #6: Think differently than others to obtain extraordinary results.

Thinking for yourself means questioning things others aren’t.

It means being okay with being wrong about “obvious” truths.

It means being on an island.

It means being thought a fool for long periods of time.

One thing I’ve always tried to keep in mind is that it’s not what you know that matters; it’s what you know that others don’t. It’s what is scarce. Going back to payoffs, scarce knowledge offers the greatest rewards.

It doesn’t matter what you know; it matters what you understand that others haven’t figured out.

Prioritize finding hidden, scarce truths.

  • Principle #7: Exploit weaknesses in public psychology to maximize payoffs.

The most interesting of life’s puzzles, to me, are driven by game theory, meaning how other people act affects the right choice for you. Rock-paper-scissors is a simple version of this; what’s optimal changes based on your opponent’s actions.

And as a whole, people suffer from a wide array of psychological biases that influence how they view reality and ultimately make decisions.

You, too, naturally suffer from loss aversion and confirmation bias and a host of other psychological traps that affect how you see the world. I’ve found the most success by working to identify and overcome these biases in myself and exploiting them in others.

However, it’s important to be contrarian not for the sake of it—not to disagree with people just to be on the opposite side—but for strategic reasons when the payoffs dictate it. If your beliefs are simply a reaction to others, well, you don’t really even have any of your own beliefs.

As Peter Thiel said, “The most contrarian thing of all is not to oppose the crowd but to think for yourself.” Identify your own solutions and combine what you believe with the optimal game-theory-driven choices to create the largest edge. Being able to combine independent thinking with a game-theory-optimal approach to decision-making is a rare and highly valuable skill.

One note: I chose the word ‘maverick’ because I always want to strive to be an independent thinker, but also in part as an ode to Dallas Mavericks owner Mark Cuban, who was the lone investor in my company FantasyLabs.

Art and Science

An accurate assessment of reality is imperative to shape decision-making, and there are a variety of available routes to arrive at what’s true. Some of these paths:

·        Logic/Reason

·        Instincts

·        Science

·        What works

·        Common sense

·        Data

·        Others’ experiences

·        Pattern recognition

Too often, people unnecessarily limit the number of paths they take toward identifying truth.

  • Principle #8: Use a multi-faceted approach to uncovering truth.

In my opinion, life’s greatest truths—the little-known ones offering the largest advantage when uncovered—necessitate an “art and science” approach. You must know when to trust data, and when to use your gut. When to rely on others’ views, and when to overrule them. When patterns are representative of the future, and when they’ll lead you astray.

My hope is that the majority of what I write shows you the mistakes I’ve made and the things I’ve learned over the years in terms of making better decisions, with an accurate assessment of reality being the foundation of that mission.

Like an artist, you should be open-minded to the forms truth can take, having an appreciation for subjective, tacit knowledge. Like a scientist, you should question everything, emphasizing falsifiability and changing your beliefs based on new evidence. Art and science are in many ways a paradoxical duo—opposites, yet complementary.

Many of the most important truths can be learned but not taught. You won’t learn to ride a bike by studying the science behind pedaling, and more skills are like bike-riding than you might think. The best way to learn is just do it. Yet you can speed up the process by which you learn, internalize, and adapt using science. You can’t learn to ride a bike without riding a bike, but you can improve the ways in which you assess information, refine your strategies, and evolve to learn a whole lot faster. Science improves the art.

To me, both art and science are about change. I also chose the word ‘science’ in part because it is representative of another process of constant change: evolution. When in doubt, you should mimic natural selection when trying to learn.

Specifically, you should:

  • Principle #9: Learn mostly via trial-and-error.

Think about the amazing results delivered by natural selection without any sort of intelligence guiding the process. Humans have evolved into the incredibly complex and sophisticated organisms we are through trial-and-error.

The key is that when something isn’t beneficial for survival, it doesn’t stick around. This should be true of your ideas and actions. Many of them are going to be bad. Most, perhaps. You need to have a process to quickly identify that they’re bad and let them die off.

The same is true in business. So many businesses are dictatorships in which the loudest or most powerful people see their ideas continually win out. A meritocracy—although very rare—calls for the survival of the best ideas, regardless of the source. The key, again, is that there is a sound process for good and bad ideas to be properly sorted out, governed by trial-and-error.

Try many things. Learn from them. Adapt quickly.

The faster and more efficient you can make this cycle, the quicker you will find success. Your starting point for truth is way less important than your process for refining and improving your beliefs, especially when you get away from a static view of the world and begin to (appropriately) see it dynamically.

  • Principle #10: Be data-driven, not a data scientist.

I’m more data-driven than most, but it’s crucial to know when and how to apply data. As mentioned, I think it’s one (very important) part of the truth-seeking puzzle. Learning how to analyze data can make you a better subjective decision-maker even when not directly applying analytics.

The reason I say to be data-driven but not a data scientist, however, is that most of the best opportunities come when problems are new, in which case there’s not much data and you you can’t afford to wait for more. A dumb person with a quick trial-and-error process beats a smart person with no such iterative approach.

Just make a decision and quickly adjust, using data as an aid and not a crutch.

Betting on Yourself

My background is in gambling, specifically betting on sports, but on a broader level, any success I’ve had has come as a result of betting on myself. Whether it was self-publishing books or starting businesses (many unsuccessfully) or playing DFS, I learned and evolved by having downside.

  • Principle #11: Learn by having skin in the game (and learn from those with skin in the game).

You will evolve and grow as a person by betting on yourself (with real downside). This could mean a lot of things to different people, and it doesn’t need to mean financial downside. Something as simple as making fitness goals public creates reputational downside and significantly enhances your chances of reaching your goals.

Today more than ever, there’s a real opportunity to bet on yourself; you don’t need to have a future that’s completely at the mercy of others.

You should reject the advice of almost everyone. You can’t achieve greatness by listening to what other people think you should be doing. Plus, doing it your way is just more fun.

But, sometimes, you should value others’ opinions. Those people should be those who are successfully doing what you seek to learn, with personal downside, and have the ability to logically articulate how they are successful.

If you want to learn business, take the advice of smart, successful entrepreneurs (and not business professors who haven’t made money in business).

If you want to learn sports, listen to what pro sports bettors have to say (and definitely, definitely not 99% of sports media).

If you want to learn poker, study pro players who can articulate their decision-making.

Listen to people who have achieved what you want to achieve and who have very sound reasoning behind how they did it.

  • Principle #12: Think long-term.

In all facets of life, the most successful people are those who think long-term. There are a variety of names for it.

Dynamic thinking.

Second- and third-order effects.

Geometric returns.

Compound interest.

In my world, we’d say EV changes when you extend your time horizon. That is, the things that are “optimal” change based on the time period for which you’re optimizing. A simple example would be exercising, which we know has more long-term value than almost anything, but if you’re trying to optimize your day, you might avoid doing things like working out or eating healthy, you know, they suck ass.

Usually, the things that are hardest now are the most +EV long-term. When unsure of what to do, make the decision that is best for the version of you that exists five years from now. This is true for your money, job, health, even how you treat people. If you’re ever undecided on an ethical decision, extend your time horizon; what’s “right” and what’s best for you tend to align. As one of my favorite thinkers Naval has said, “Being selfless is long-term greedy.”

Even the math on decisions like what to eat or how to work out changes with a slight shift in time horizon. If you’re trying to maximize calories burned while working out, for example, you might favor more cardio-centric exercises, whereas lifting weights keeps your metabolism up for a longer period of time and builds a muscular base for compounding returns, i.e. jogging helps you burn calories now, while resistance exercise allows your body to become more efficient at burning future calories. For long-term health, the last thing you should worry about is day-to-day fluctuations in weight, which are mostly the result of how much water you’re retaining at any given time.

When you combine the world’s inherent uncertainty with compound thinking, you can see the power of optionality. If we admit we’re not that good at seeing what the future might entail and we’re calculating a decision’s long-term EV, we have to assume there’s a decent chance we’ll be wrong or things will change and we’ll need to adjust.

As such, whenever a decision is remotely close, choose the one that is most reversible and allows for the greatest future optionality. This is part of the evolution-esque, action-over-planning, iterate-quickly-and-move-on style of learning I believe to lead to the greatest long-term success.

  • Principle #13: Learn to win games and turn life’s obstacles and your goals into games to “win” them.

This is the final principle. Unlucky number 13. I did that on purpose.

Have you ever noticed that people who are really good at one game tend to be awesome at other games? Amazing chess players, for example, seem to be able to solve almost any game to find success.

The reason is that the process of solving games is pretty similar no matter what game you’re playing.

·        Learn the rules of the game, inside and out.

·        Think probabilistically.

·        Find edges—usually ways to exploit the game’s “hidden” rules.

·        Use various filters to make accurate assessments of an everchanging reality.

·        Think logically to adapt to the shifting landscape faster than others.

·        Utilize game theory to take advantage of others’ weaknesses.

·        Act quickly, make adjustments, and evolve.

This applies to everything from trading to exercising to traveling to making money online. Learn to win games, turn life’s problems into a game, and beat them.

Part of that means not only accepting life’s inherent chaos, but embracing it. You’ll get luckiest when, somewhat paradoxically, you stop trying to limit and control variance.

To do it, you’ll need to be independent. Think differently. Be a contrarian.

You’ll need to be a maverick. Ready to bet on yourself?