JonathanBales.com | DFS, Food, Business & Life

Q&A: How do you quickly find an edge in a new space?

When you are entering a new space (playing a new game, taking on a new business venture, etc.), what do you do to learn the area quickly and try to find an edge?

Thanks to Pat for the email, which hits on a key word that I believe is the most important component to finding an edge: quickly. More so than being right, being fast – and first – is the true key to finding an edge. Think about the differences in the competitive landscapes of things like early DFS/poker versus the games today, or building a stacked MLB roster pre- and post-Moneyball.

Whenever possible, be a big fish in a small pond. If you want to find an edge in whatever game you’re playing, first make sure you’ve chosen the right game. I use the word ‘game’ loosely here. To me, almost everything in life – certainly in competitive settings – is a game; there’s really no fundamental difference in how you should approach starting a business as compared to kicking your friends’ asses in Monopoly, for example. And being first to the scene is the easiest way to reduce competition.

Second, learn the rules. This sounds simplistic – and it can be – but you’d be surprised how many people don’t truly grasp the rules. Even in true games with clearly defined rules, so many people make sub-optimal decisions. I was playing Connect 4 recently with someone who was genuinely trying to win but didn’t care about going first or second. I’ve chosen to no longer speak to this person.

In games with less-defined rules, like business, you need to work to figure out the rules and how to beat them. In less efficient markets, of which I believe much of the business world falls, you can get by simply looking for and exploiting edges in these obvious areas (see my 40 counterintuitive tips to business).

And finally, make up your own rules whenever possible, which goes back to being first; a game might have defined rules, but the games within the game are ever-changing and able to be manipulated. Billy Beane was participating in the same broad game as every other MLB team, but chose to win in a unique way: by effectively solving a math problem – and being the only organization doing it – rather than to compete against everyone else with traditional scouting.

Whenever you can, (legally) move the goal posts such that you’re playing a different game than others – one in which you know you have an edge. But make sure you first know the rules (the ones that everyone else knows) and how to exploit them. Kurt Vonnegut wrote “If you want to break the rules of grammar, first learn the rules of grammar.” He also said “Do not use semicolons. They are transvestite hermaphrodites representing absolutely nothing.” I think he’s right; they’re worthless and sort of pretentious.

The first step in being contrarian is learning what isn’t contrarian. The uncontrarian contrarian.

R-P-S Is Life

When I play rock-paper-scissors with someone, which I try to do all the time as a way of settling disputes, paying for a bill, etc., the convo usually looks something like this:

Me: Okay, let’s just play something fair like rock-paper-scissors to see who needs to _____.

Them: Okay.

Me: Best of 21?

Them: 21!? What are you fucking crazy?

Me: Okay fine, normal best of seven then.

Them: Okay fine.

I start by offering a “fair game” in which I think I have an edge. Am I totally delusional in thinking I can win like 55% of throws against an average player? Maybe, but whatever, if you aren’t living your life to try to increase your rock-paper-scissors win rate by a single percentage point then why are you even living?

But really, rock-paper-scissors is pretty high-variance, which means the biggest advantage I can unlock – if I have any edge at all – is increasing the sample size of throws. Most people do one throw in a rock-paper-scissors match, and usually best-of-three at most. I suggest a totally absurd number of throws as an anchor so that I can easily get the best-of-seven match I want. Sticking around for potentially seven throws when I sometimes take 30 seconds to think between them might sound pretty awful, but not as awful as 21 of them.

In the Gambling Olympics (which I won not to brag), poker players Brandon Adams and Joe Ingram employed some unique tactics in an effort to beat me in rock-paper-scissors (I beat B.A. on one throw for $1k and lost 10-11 to Joey in a best-of-21). Against Adams, I suggested a practice round to get the rhythm down, which obviously wasn’t to actually “get the rhythm down” but rather to collect information, and B.A. immediately said “no.” He’s one of the top overall gamblers I know and is constantly searching for edges in life. I recommend his short book Personal Organization for Degenerates.

When I played Ingram, he stalled for like a minute after every round to throw off the rhythm of the game:

Ingram used Bales’ tactics against him, slow-playing every throw and taking long breaks so he could pace around the pool and pump himself up. He disrupted the flow of the game and made it almost impossible for Bales to develop a rhythm. On top of that, Ingram’s loud and aggressive style seemed to get under the skin of the typically stoic Bales. He maybe even got into Bales’ head by “practicing” his upcoming throws right in front of him, daring him to call his bluff.

I thought this was really smart because I tend to take as much or as little time as I want and then start the throw. Sometimes I want to go very quickly if the throws go in such a way that I have increased confidence in what my opponent will subconsciously do next, and usually people conform to my speed.

You know, I just realized I sound like a total fucking psychopath btw. At least I am aware.

——————–

So how do you quickly find an edge in a new space?

The first rule is pick the right game where you can be first. Find something with upside and little competition.

The second rule is to learn the rules. In rock-paper-scissors, my strategy of playing a different game of increasing the number of throws is only advantageous if I’m good at rock-paper-scissors; with a <50% win rate, it’d be detrimental. You can’t win the meta game if you haven’t yet mastered the basic one.

Once you know how to leverage the agreed-upon rules, the third rule is to make your own rules. First learn to beat the game, then learn to exploit opponents by looking for edges where they aren’t. As I mentioned in my last post on the following the habits of successful people, it’s not just what you know that matters, but what you know that others don’t.

Pick the right game. Optimize around the rules. Find scarce knowledge to subtly change the game in your favor.

Q&A: Should I mimic the habits/strategies/traits of winners and other successful people?

Note: This is an adaptation of a question I received about analyzing perfect or winning lineups in daily fantasy sports.

Should I mimic the habits/strategies/traits of winners and other successful people?

Maybe, but probably not.

In every industry, there’s seemingly endless content dissecting how successful people operate. I was at Barnes & Noble last night and saw maybe five dozen titles analyzing how rich people got rich as a means of offering advice on how you should try to become wealthy.

I think this is generally wrong, for a lot of reasons.

There’s a selection bias.

If you look solely at “winners,” there’s a huge selection bias in terms of the population you’re studying and thus any conclusions you draw about a wider population – i.e. yourself – will be incorrect at worst and inconclusive at best. You can’t determine if a particular strategy or trait “works” without analyzing baseline rates – how many others are employing the same strategy or trait.

In the context of DFS, studying winning lineups – which I see all the time – is one of those things that leads to hypotheses that are inconclusive at best and, many times, just wrong. As an example, if 90% of all players employ a certain strategy but only 80% of winners use that same tactic, studying winners could lead you to believe the approach is optimal – four out of five winners use it – when in reality it’s pretty detrimental.

You’re often not viewing a causal relationship.

Related to the first point, many conclusions drawn from biased data will point to strongly correlated (but not causal) relationships. One example is the “guys-who-are-dicks-get-the-girls” phenomenon, which I think is somewhat true but misleading. Girls tend to like guys with a high degree of confidence (not to be confused with those who frequently quantify their confidence levels…”I’m a coin flip on if I want to meet your friends” doesn’t tend to work, somehow, regardless of my accuracy Ia mean C’MON LADIES), and guys who do something no one likes (treat people like crap) can often at least feign a trait that people do like (being confident).

So if you look at the average guy who you think can easily get girls, you might conclude it’s right to be a douche when in reality douchey guys might just be more confident and you don’t actually need to treat women like shit to get them to like you. Sounds crazy, I know. I didn’t believe it myself at first.

They very easily could have just gotten lucky.

Many successful people just got lucky, plain and simple.

There’s probably no longer an edge.

If what you think you know about what it takes to become a winner is something a lot of other people know, too, then it might not be advantageous anymore. What’s “right” often changes based on others’ actions, and since people by and large tend to mimic the actions of those they see who are successful, the practice tends to become self-refuting; once it’s obvious something works, it doesn’t anymore.

This is one reason I advocate for the collection not just of knowledge, but more important, scarce knowledge; it’s not what you know, it’s what you know that others don’t which is valuable.

What’s right for others might not be right for you.

Winners change. A pro bodybuilder has a workout regimen and nutrition plan that probably doesn’t look much like how you should approach fitness. Billionaires do things with their money that don’t make sense for the average person. The freelance writer with a massive rolodex of clients doesn’t need to and shouldn’t work in the same manner as when he/she had no jobs.

So should you study the habits/strategies/traits of winners as a guide to finding your own path? I say no. You’re so often just viewing things that are correlated with the desired outcome – not a cause of it. Forge your own path; not only is it the most optimal way, it’s also the most fun.

How to Deal with Uncertainty

There are dozens of studies showing how far humans will go to avoid uncertainty, forgoing far greater potential payoffs in favor of just knowing what they’re getting right now. Is it actually true that there are dozens? I have no idea. But there’s at least one, which means it’s undeniably true and should never be questioned. For real though, most people will take $20 over a 50% chance of $70—even though the latter is “worth” $35—because of the risk involved. Is that true? Again, I have no idea. But just go with it.

In my books, I’ve talked a lot about the benefits of (sometimes) taking on risk and, more specifically, uncertainty. There are risks which are known and whose exact expected value can be calculated—such as the spin of a roulette wheel or the above $20 example—and then there are those whose EV can’t be exactly determined. There’s a small edge in using basic math to take on the first type of risk when smart, but I’m most interested in finding situations in which it’s shrewd to take risks on potential outcomes with high uncertainty and inexact payoffs.

I think accepting and betting on uncertainty is one of the biggest edges in business because so many people are naturally fearful of it. We’ve evolved to go to extreme lengths to avoid uncertainty and we feel more pain from negative outcomes than we do pleasure from positive ones. So few people are put in situations that allow them to learn to deal with uncertainty that it’s just really easy to find EV there; identify and exploit spots in which others are making bad bets because they’re afraid of the unknown.

An example of this in business might be doing something that can’t be immediately tested (I believe accurately testing most things in a way that can actually help shape future decision-making in actionable ways is pretty rare, but that’s for another post). Will this specific idea work? “Well, I have no idea and there’s not good evidence either way, but I know that fact has scared off others and the payoff is clearly high, so I’ll take on the uncertainty.”

Of course, there are limiting factors to accepting uncertainty, such as not being in a position in life to practically make it happen, or perhaps becoming really anxious in the face of uncertainty such that the stress isn’t worth it. I think the latter issue is a real problem for many people, in all forms of life—they constantly avoid uncertainty because it causes so much stress—and so I’ve listed a few ways in which I’ve effectively improved my ability to not only accept and embrace uncertainty, but also feel comfortable in specifically seeking it out.

Think probabilistically.

This is probably the most important component to dealing with risk and uncertainty—and something that is very difficult for many. Even with something that’s clearly probabilistic—such as the odds of rain tomorrow—people are really crappy as a whole at understanding and accepting chance.

But it’s really important. Instead of saying “this shouldn’t have happened, I can’t deal with this shit anymore,” you should be saying “this had a 10% chance of happening (or was at least within the known range of outcomes) and I should better prepare for it in the future.”

To help, play games with luck involved, such as poker, blackjack, Yahtzee, and so on. They’re incredibly useful teachers of probability and work as an aid to help you understand you can do the right thing and still experience negative results (and vice versa).

Accept the worst outcome.

Typically, people seem to be more afraid of how uncertainty makes them feel than the uncertainty itself. I’ve been the victim of this. I still naturally get a little scared when I fly. It makes no sense. I know it’s irrational. And yet when that plane makes the turn onto the runway and fires up the engines to take off, like clockwork, I feel like I have to take a shit the size of a football. That’s usually because I just ate Burrito Elito and got the double meat again—“today is the day you won’t get sick,” he said to himself 30 minutes before yet another episode of explosive guac-fueled diarrhea—but still.

Before any high-uncertainty situation, try to consider what the worst possible outcome might be. Visualize it happening. Really think about how it would affect your life, and accept that as true.

Then change your underwear.

Drop expectations.

I was talking with a friend earlier today about why people feel pressure in their jobs, and I think it really just comes down to expectations. Stress is typically the result of overvaluing the external—such as others’ opinions or what “should” make you happy—and thus can be at least reduced if you find a way to drop expectations.

Practice mindfulness or take mental coaching to better live in the moment and free yourself of the illusion of what “should have been.” Headspace and Primed Mind are two apps I like.

Increase exposure.

There are two reasons I believe you should increase your exposure to uncertainty, in addition to it just being the +EV thing to do. The first is that, in the same way you get less and less nervous each time you’re forced to speak in public, you’ll naturally just improve your effectiveness in dealing with uncertainty when you practice it.

The second is sample size. If you flip a coin once, the result is completely uncertain. If you flip a coin 1,000 times, it’s not; it will be very close to 50% heads and 50% tails. Randomness can be semi-paradoxically extremely predictable—the most predictable thing of all since we know exactly where it will regress toward the mean—and so just maximizing the number of uncertain situations can alleviate stress because your range of outcomes can actually become more consistent.

Try things others aren’t. Market your product in a totally new way, go on an unusual date, or create a unique proposal for your boss while accepting the fear of the unknown of what might happen. Do it again and again until you’re broke, single, and have debilitatingly low self-esteem…but are really good at dealing with uncertainty.

Create conditionals.

In poker, there’s a saying that the best players continue to get the luckiest. That’s true; they expose themselves to as many situations to get “lucky” as they can, and they’re prepared to deal with uncertainty when it arises.

Don’t over-plan, but get in the habit of playing out scenarios in your head and considering how to benefit most when the thing that “should” happen doesn’t happen.

Avoid dissecting short-term variance.

If you’re confident in your long-term approach to business, family, friendship, or whatever, don’t worry about short-term fluctuations. Don’t overanalyze the price of crypto/stocks or misinterpret the “meaning” of individual sports plays.

Accept responsibility.

Worrying about “what if” is useful for future scenarios, but not the past. It only helps to distract from what should be a constant search for improvement. If some donkey beats you in DFS by less than a point or someone sucks out on you on the river in poker or a total fish gets a promotion over you at work, you should be thinking, “Well how can I work to score more points in DFS, put myself in better spots in poker, or provide more value at work?”

Short-term struggles might be mostly the result of bad luck, but I believe you’ll benefit most by taking responsibility and working to make sure you experience as little negative variance as possible in the future.

Work out.

Just fucking exercise man.

Accept that life is meaningless and you’ll die soon.

I mean, who really cares, anyway? If you consider how inconsequential you are within this multiverse, universe, galaxy, solar system, planet, country, city, neighborhood, and even group of friends, it’s pretty easy to stop worrying about why Tina didn’t call you back after what was by all accounts a wonderful time for both of you especially after you got the uni, wagyu, AND toro sashimi even though they weren’t part of the omakase and she seemed to like them but who even knows she’s clearly good at faking it considering how she’s acting now but it doesn’t really matter it’s just a girl and you haven’t been thinking about her at all really maybe once or twice since the date JUST CALL ME BACK TINA PLEASE!!!!

The Art of the Negotiation: My Latest Prop Bet with Adam Levitan

If you listen to the Three Donkeys podcast, well, I mean, you’re probably kind of a loser to be honest. But you also know that Peter, Levitan, and I – along with a big group of gamblers and personalities (Brandon Adams, Joe Ingram, Scott Blumstein, Sleeze, Manz, and Barstool Smitty, among others) are going to compete in a Gambling Olympics in Vegas in about a month. We’ll be gambling on everything from poker to sportsbetting to rock-paper-scissors to Connect 4 to beer pong, competing to win gold, with tons of side bets already shaping up.

One of those side bets was finalized the other day, as I booked 5-1 to against Levitan – my $1k to his $5k – on the 6-12-18-24 challenge. For those unfamiliar, this means jacking off, drinking beer, eating donuts, and running miles – assigning each of 6, 12, 18, or 24 to each task – in 24 hours. As of now, I will be running six miles, masturbating 12 times, eating 18 donuts, and drinking 24 beers.

We had a previous winner of the challenge on the podcast to talk a little strategy, and it was fucking hilarious.

I’ll probably talk about my approach heading into the challenge – an event so prestigous I hear they’re considering it for the real Olympics – but for now, I just wanted to post my negotiation with Levitan, which was completed in Slack, to give you guys an idea of how these things (sometimes, sort of) come to be.

The Negotiation

jonathan.bales [12:48 PM]
what odds are you guys giving me on 6-12-18-24? you said 10 to 1 levi? I think that’s fair :slightly_smiling_face:

adam.levitan [12:49 PM]
i said nothing.. let’s nail down the official rules.. all your miles have to be under 10 minutes and outside?

jonathan.bales [12:49 PM]
I mean whatever you want
that’s clearly way harder and a potential problem though
10 min is actually hard to do for possibly 12 miles
I mean it’s almost a half marathon

adam.levitan [12:50 PM]
oh i assumed you were running 6

jonathan.bales [12:50 PM]
idk if I can JO 12 times after some practice
yeah I mean I am gonna have to but I’m running out of steem on these JOs

adam.levitan [12:53 PM]
if you’re running outside and averaging a 10-minute mile while running them consecutively i can give you 6-1… but I’m not going to give you a lot of action on it, can’t let you beat me for like 30k

jonathan.bales [12:53 PM]
consecutive? that’s way different
don’t think I can do that at all
I assumed I could take a break after each mile

peter.jennings [12:54 PM]
Im on bales side

adam.levitan [12:54 PM]
oh
well then i don’t see why you couldn’t do it
you’re in way better shape than the dude who came on the pod and did it
and you drink every day
doughnuts are easy
just gotta get the jerks done and you’ll have freedman to help you there

jonathan.bales [12:56 PM]
I don’t drink every day for the last time levi

adam.levitan [12:56 PM]
haha

jonathan.bales [12:56 PM]
if you think 18/24 beers/donuts is easy then idk
and either miles or JOs or both gonna be hard af too
I think I am equipped to do it more than avg person but I think I’m likely to fail
honestly

adam.levitan [12:57 PM]
i mean if you take 20 minutes off between each mile it’ll be easy

jonathan.bales [12:57 PM]
even if you remove that, there’s some decent chance I can’t physically do 12 JOs

adam.levitan [12:57 PM]
for sure

jonathan.bales [1:00 PM]
so you’d do 6 to 1 if I ran it straight, no stops at all?
like if I fail then I just start back at 0 miles?
trying to think of how much easier it is to stop and what that equates to in a line if 6 to 1 is fair for that

adam.levitan [1:00 PM]
you’d have to average a 10-minute mile for whole thing.. so if you do 6 miles you have 60 minutes total from start to finish

jonathan.bales [1:01 PM]
there’s almost 0% chance I can complete six miles right now
I’ve literally never run two miles

adam.levitan [1:01 PM]
yeah well if the running isn’t hard i don’t see how you fail really
unless your dick fails you

jonathan.bales [1:02 PM]
he’s good for six easy
he starts to get ornery at seven
idk how you think 18/24 beers/donuts is just a given
that’s so hard
and in conjunction with running and jacking off
will take 6 to 1 my $1k if I can stop once running
5 to 1*

adam.levitan [1:06 PM]
if you do the total distance across total time you can stop as many times as you want

jonathan.bales [1:06 PM]
lol
need a break. can’t do six miles in 60 min
will do two segments of three in 30
it is fucking Vegas in summer man it is gonna be literally 120

adam.levitan [1:07 PM]
i can give you 3.5/1 on that, but i’m not happy about it and only doing it for the #content

jonathan.bales [1:08 PM]
like it might not even be safe

adam.levitan [1:08 PM]
don’t be a pussy
death is one of the outcomes, yes

jonathan.bales [1:08 PM]
i’d do 6 to 1 on one hour before 3.5 with a break
outside is just bananas
i won’t be able to breathe

adam.levitan [1:09 PM]
the only way i’ll win is if you fail at the running
so yes, i’d be rooting for “unable to breathe”

jonathan.bales [1:09 PM]
https://blogs.scientificamerican.com/guest-blog/too-hot-to-handle-the-dangers-of-running-in-the-heat/
i’ll die for content, it’s fine

adam.levitan [1:10 PM]
yeah i felt like this in 3rd set of frying pan match
you’re so hot you get the chills

jonathan.bales [1:10 PM]
that was fucking denver

adam.levitan [1:10 PM]
yep
it was like 90 but i know.. Vegas is asking for death
that’s how i want to win (edited)

jonathan.bales [1:11 PM]
I will do 6 to 1, six miles in 66 minutes

adam.levitan [1:12 PM]
outside?

jonathan.bales [1:12 PM]
yeah. and I honestly think this is gonna be a disaster because I can barely finish one mile in under 10…ran the other day

adam.levitan [1:13 PM]
do you have to run during the day?

jonathan.bales [1:14 PM]
what time range is acceptable. clearly I’m running at night if I can

adam.levitan [1:15 PM]
ugh i dunno man.. i don’t want to bet against you in physical activities
nighttime temps in july in vegas average 79 degrees
nice running weather

jonathan.bales [1:15 PM]
the last mile bet I had I ran a half mile
this isn’t lifting

adam.levitan [1:16 PM]
we won’t be able to film your death if you do it at night

jonathan.bales [1:16 PM]
I will do it when light out
idk how I am gonna set it up exactly…need to think about it and what is best in terms of when I start, when I am trying to run, etc
my lean was I’d drink and eat at night, sleep, drink maybe 1/2 in morning and run then
I can’t wait too long strategically or else I have to run after eating and drinking too much. there’s just no way

adam.levitan [1:18 PM]
are you allowed to get more action? Like if you can win 5 BTC instead of 2/3 BTC you’ll obv train harder

jonathan.bales [1:18 PM]
I am gonna try obv….I’d be fine reducing our odds if I get more though
like each 10k to win interval I go down a point or something…
I will do whatever you want on that b/c you are right I will actually try if I get a bunch of action…I just doubt I will

adam.levitan [1:20 PM]
OK i’ve wasted enough of this day.. let me think about it

jonathan.bales [1:20 PM]
comee onnnnn gimme something. have to get this booked

adam.levitan [1:21 PM]
freedman verification on jerks?

jonathan.bales [1:21 PM]
I mean obv

adam.levitan [1:21 PM]
no live women in room obv, even for fluffing

jonathan.bales [1:21 PM]
for that I will have a room that is inspected before and I will produce sample each itme
yeah no women OR MEN

adam.levitan [1:21 PM]
no cam girls either… no human interaction

jonathan.bales [1:21 PM]
I can watch porn right

adam.levitan [1:21 PM]
right

jonathan.bales [1:22 PM]
donuts will be standard glazed

adam.levitan [1:22 PM]
frosting?

jonathan.bales [1:23 PM]
krispy kreme glazed I thought was standard

adam.levitan [1:23 PM]
beers minimum 5% ABV?

jonathan.bales [1:23 PM]
no way….standard miller lite bud light whatever
those are just under 5 arent they?

adam.levitan [1:24 PM]
coors light is like water, think it’s 4

jonathan.bales [1:24 PM]
the other two main ones are 4.2
normal cans of lite beer

adam.levitan [1:25 PM]
no funnels?

jonathan.bales [1:25 PM]
8 oz beers

adam.levitan [1:25 PM]
no shotgunning

jonathan.bales [1:25 PM]
no funnels, drink from can

adam.levitan [1:25 PM]
8oz? you mean 12oz

jonathan.bales [1:26 PM]
yeah I guess
whatever like a normal looking can is
yeah 12
looked it up
6 miles in 66 min, has to be during day, unlimited breaks, 12 oz lite beers, krispy kreme glazed donuts, produce semen 12 times
only other contingency I can think of is vomit

adam.levitan [1:29 PM]
OK i’ll give you 5-1 given the 66 minutes but you have to run between 9am and 6pm… if you sell more than 10k worth of additional potential winnings that goes to 2.5-1
yeah i think vomiting is tough because once you puke you can drink so much more beer

jonathan.bales [1:30 PM]
right. clearly purposely vomiting is out. I see a very high chance of puking while running though and that would stink if I was DQed on that
like what if it’s just a little tiny vomit

adam.levitan [1:30 PM]
haha
are you going to drink any beers at all before running?

jonathan.bales [1:31 PM]
since I am running in the morning presumably, I would like a contingency that I can vomit while running or up to 15 min after, but no other time during the competition. I’d also like to be able to purposely puke at the end once it is clear I finished and am not involuntarily vomiting

adam.levitan [1:32 PM]
hahahahaha

jonathan.bales [1:32 PM]
and idk on the beers but it would be like 1-2 and maybe one donut before at max
idk though…might just do nothing and run it right away

adam.levitan [1:32 PM]
you are going to take the full 24 hrs right? so there are 2 mornings, presumably

jonathan.bales [1:33 PM]
there will be just one if I start at night which I think I will
also better for content if I am finishing at like 8pm or something

adam.levitan [1:33 PM]
yeah so you’re going to jerk, drink, eat.. go to sleep.. wake up and run and then finish
god this is so easy if you can do the run
we’re basically betting on the run, that’s it

jonathan.bales [1:34 PM]
can you jack off 12 times in a day? no. eat 18 donuts and drink 24 beers or vice versa? no

adam.levitan [1:34 PM]
i can do 6 a day
i can easily do donuts

jonathan.bales [1:34 PM]
I need to do 12 though

adam.levitan [1:34 PM]
i can’t drink the beer but you def can
nah 6 jerks before sleep, 6 jerks across next day
easy

jonathan.bales [1:34 PM]
six jerks before sleep come on

adam.levitan [1:35 PM]
one an hour for six hours?
then sleep for 6 hours

jonathan.bales [1:35 PM]
a good portion of jerks are gonna have to come after drinking
gonna be a real issue
6 to 1 and I cannot drop to 2.5 to 1 becuase that pretty much means I can’t even get other action
oh I see…I could get 9k more?
6 to 1 and 3 to 1 on that and it is booked

adam.levitan [1:37 PM]
not giving 6-1, it’s too easy
will give 5-1 for the content
but still think it’s a bad bet

jonathan.bales [1:38 PM]
5 to 1 and 68 min

adam.levitan [1:38 PM]
can’t do it.. failing the run is my only shot

jonathan.bales [1:38 PM]
and I want to clarify the vomiting proposal is fine?
5.5 to 1 then and that’s it
66 min
fuck it, it’s $500…5 to 1 is fine who cares

adam.levitan [1:40 PM]
so you’re saying you can vomit during the run? But you can’t vomit up a bunch of beer and doughnuts

jonathan.bales [1:40 PM]
yes that is correct…I don’t want to be DQed running in that heat and puking but the spirit isn’t to be able to puke up a bunch of beer and donuts
I do want to be able to puke once I finish, however
why don’t we do 2 beer and 2 donut max pre-running
although I almost certainly won’t be eating two donuts for sure

adam.levitan [1:42 PM]
ok that’s fine.. 2 beers and 2 donut max within 2 hrs of run
then you can puke.. but if you do complete the run, you can’t puke again rest of day

jonathan.bales [1:45 PM]
six miles in 66 minutes, unlimited breaks and able to puke up no more than two donuts and two beers from within two-hour window if I do happen to vomit during the run or within 15 minutes of it. otherwise no vomit until last task completed. 12 jackoffs that are produced in a semen-free room. 18/24 beers/donuts. 12 oz lite beers and standard glazed krispy kreme donuts. 5 to 1 on $1k and goes to 3 to 1 if I get more than $10k of additional to-win action.

adam.levitan [1:45 PM]
ugh fine.. it’s booked just for the lulz

jonathan.bales [1:46 PM]
booked

And that, my friends, is the art of the negotiation.

13 Tips for Investing in Bitcoin and Other Cryptocurrencies

I’m not a cryptocurrency expert. If I were to rate my knowledge of crypto from 0 to 100, I’d give it about a 3. But since most people are at about 0.2, that means I’m 15 times smarter than you about the topic and, even though I barely understand how the shit works, I’m justified in giving advice.

It’s not what you know, but how much you can pretend to know when talking to people who know even less than you. That’s how sales work nowadays, right?

The purpose of this post isn’t to act like I’m a crypto savant—I am straight up telling you I’m a donkey on the subject—nor is it to give you a bunch of basic instructions on how to buy Bitcoin, Ethereum, or anything else. You can find both know-it-alls and generic how-to guides all over the internet.

Instead, I thought it would be cool to share a few things I’ve learned thus far in my dive into cryptocurrency—most of which are more trading/market-centric than specific to crypto—and maybe clear up a few misconceptions.

Learn to buy and properly store major coins before trading.

If you listen to The Three Donkeys podcast, you hear Peter Jennings, Adam Levitan, and I tell stories about trading ridiculous cryptocurrencies like Titcoin, or the time I owned a huge percentage of Vegas’s strip club currency (not to brag).

And so my initial piece of advice here might surprise you: don’t get into crypto so you can buy up coins whose primary purpose is to make it easier to get a lap dance. “Now wait, I’m supposed to swipe this where?!”

This post isn’t meant to walk you through how to buy and store crypto or go into depth about the various exchanges and wallets because there’s a mountain of content out there already, but I’ll give you a few reputable sites/tools to help you out. There’s a lot of good stuff out there, so this is just a shortlist to get you started…

Coinbase

Simple to use
Beginner-friendly place to start buying BTC, ETH, BCH, or LTC

Kucoin.com

Ability to trade cryptocurrency
Beginner-friendly
Lots of bonuses and giveaways

Changelly

Must already own cryptocurrency to use
Allows trading of currency pairs you cannot trade elsewhere
Easy-to-use exchange that searches for best rates at other sites for you

Trezor

High-security hard wallet on which you can and should store coins you plan to hold
Safer than keeping coins on an exchange

There are a variety of other sites and exchanges out there, but there’s really no reason to be trading Einsteinium on an advanced exchange until you learn how to purchase currencies and store them on a hard wallet.

I’d start by learning how to purchase Bitcoin on CEX.IO or a comparable site and send anything you don’t plan to trade to a Trezor or another hard wallet (Ledger is another good one).

A couple tips: use a bank transfer to purchase crypto (lower fees than a credit card) and make sure you enable two-factor authentication on any site you use.

If you want to learn more about crypto basics, check out this collection of resources.

Don’t diversify for the sake of it.

This is going to be pretty unpopular advice. All over the internet, you’ll find people telling you to not put all of your eggs in one basket. This is true for pretty much every type of investment. It’s certainly true in sports speculation; DFS players are told to diversify their player exposure and sports bettors to hedge their bets.

I don’t believe this is smart. The only reason you should diversify is to be able to invest more money, overcoming a lower ROI with more volume to see greater long-term gains.

I’ll use DFS as an example since that’s my expertise. If you think Michael Thomas is the top wide receiver play this week, you should have as much money on Thomas as you’re willing to stomach. It’s high-variance to not diversify, which is why people avoid it—it feels shitty to have large swings—but it will lead to the greatest ROI over the long run (if you’re right).

So why not put Thomas in every lineup? Well, you’re always trying to balance the highest possible ROI—which zero diversification allows for—with the greatest overall profit and the lowest possible risk of ruin (going busto). If you were to seek the highest ROI and greatest profit, you’d not diversify at all and play 100% of your bankroll, which would of course be idiotic since your long-term risk of ruin would be 100%.

As it relates to crypto, I’m of the opinion that you should identify what you believe is the best value, then invest as much money as you’re willing to lose in that single asset. Then, knowing that adding another coin—diversifying—can slightly reduce your risk of ruin, put as much money as you can stomach into that (which should be a lower amount).

In this way, you’re diversifying solely to be able to invest more money, increasing your profit and reducing your risk of ruin.

Okay, now two caveats. The first is that the swings in crypto are bananas. If you haven’t woken up to 35% of your investment just—poof—gone, you haven’t lived my friend. And so with that greater volatility comes more of a reason to hedge.

The second caveat is that it’s more difficult to know what’s “optimal” in cryptocurrency than in other alternative investments. Although I might be off a bit here and there, I pretty much know the top values—or a small pool of players who could be considered the top values—in DFS. It’s somewhat obvious. That’s probably not true in crypto—certainly not to the same extent and especially not for someone like me who doesn’t know what the hell he’s doing.

If you believe in the overarching concept and believe the entire cryptocurrency market cap will rise, there’s an incentive to just stay in the game, meaning it’s probably wise to diversify more here than in more “solved” games like DFS.

Nonetheless, I think something like a 60/25/10/5 type of split is better than putting 5% of your cash into 20 different coins.

Market cap matters more than coin price.

A friend of mine saw that I had some early trading success—mostly just the result of a bull market for altcoins and a few lucky moves—and asked if he could give me some money to invest. I agreed, and so he’s become interested in the space and has his own suggestions of trades to make. In the beginning, those were often, “We should get XYZ because it’s under $1.”

This is the most common mistake I see made by those new to crypto. The price of coins is relevant only after accounting for the circulating supply. The number of coins multiplied by the price of those coins is the total market cap for the token, and that’s what really matters. When you buy any coin, what you should really be focused on isn’t the price of the coin, but what percentage of that total market cap you’re purchasing.

As an example of the difference, take a look at the top six coins in terms of market cap (specifically Ripple), via CoinMarketCap.com:

At the time of writing this, Ripple costs 23 cents—nearly 300 times less than Litecoin and 1,800 times less than Dash. Nonetheless, because of the way in which Ripple operates, there’s a much larger circulating supply, and thus the market cap of Ripple is over twice as large as Litecoin and Dash.

On the flip side, I can’t tell you how many people I know have said, “I’m not buying Bitcoin right now. If I invest $5,000, I can’t even get a whole token.”

But who cares? If the market cap of Bitcoin increases by 20%, someone investing $5,000 will have made $1,000 in the same way that they’d make $1,000 if Ripple increases 20%. Yes, it could be easier for certain coins to see massive swings in value, but that would be due to their market cap and not the coin price. It’s more difficult for Ripple (nearly $9b market cap) to go from 23 cents to 46 cents than for a coin with a $100 million market cap to double in price (regardless of the cost of one token).

The point is that the price is effectively arbitrary based on the circulating supply of tokens. If there were theoretically just one circulating Bitcoin that cost $130b+, it wouldn’t change the merits of your $5,000 investment in it.

Don’t get hung up on the absolute price.

Don’t take profits unless there’s a change in circumstances.

I got a hotel in NYC a couple weeks ago and planned to go up for the day. When that day came, I just didn’t feel like going anymore, so I didn’t. The fact I paid for the hotel meant nothing—it was a sunk cost and that money was gone—and so the only relevant factor was really whether or not I felt like going to NYC that day.

Don’t let past decisions affect future ones if they have no bearing on your happiness (or, in investing, your expected value). With any investment, it’s irrelevant whether or not you’re up or down or you’ve removed your initial investment or you’ve run it up 10x or whatever. I can’t tell you how many times I’ve been talking with my mom about crypto and she has said, “You should take out some of the money you’ve made.”

There are really only a couple reasons you should be taking profits, all of which are the result of something changing. One would be that your net worth has shifted and you’re over-exposed to crypto. As an example, let’s say you bought Bitcoin at $1k with $50k in the bank, and you think it’s smart to have 20% of your money in BTC (so you bought $10k of it). If the price of BTC is now $8k and you didn’t sell, your BTC would be worth $80k. Assuming your net worth otherwise didn’t grow, you’d have $80k in BTC and $40k in cash. Even if holding is +EV, it might be too much risk for you to stomach, in which case you’d be justified in taking money out.

Of course, if you think the future of crypto has changed for the worse—or that your money could be better invested elsewhere—then you’d also be justified in changing your allocation.

Finally, although it’s admittedly irrational, I think you could make an argument for removing your initial investment solely for peace of mind. If you invested $1k in crypto and have run it up to $10k, removing the initial $1k isn’t the worst idea if you think it will help you psychologically. A lot of people think and act differently when they’re on a freeroll; just look at how people act in casinos when they’re “playing with house money.” If it is comforting to you think “the worst that can happen is I’m back to even,” then removing a small portion of your crypto funds so you’re on a freeroll is probably fine. It’s not mathematically the right decision, but you can potentially make up for the loss in EV from just having peace of mind that you’ll never be down from your investment.

The goal isn’t to be right as often as possible.

The goal is to make as much money as possible. I’d rather be right 10% of the time but see 100x returns when I hit than to be correct 80% of the time and see 2x returns. Being right is comforting, but finding disproportionate payoffs on events others are overlooking makes you more money. This is related to antifragility—a concept I talked about in my post on why I bet on Trump to win the presidency.

Crypto worth should be measured against both USD and BTC.

Let’s say the current prices (in USD) of Ethereum and Bitcoin are $350 and $7,000, respectively (meaning one BTC is 20x more valuable than one ETH in terms of dollars). If the price of BTC rises to $7,350 and ETH stays the same at $350, the latter coin will show just under a 5% decline in value when compared to BTC. In terms of your purchasing power if you were to convert your ETH to USD, nothing really changed, even though the ETH/BTC rate got worse.

So did ETH decline in value? Yes and no.

Although you still have the same amount of money (in USD), you should still care about how other cryptocurrencies compare to BTC because, long-term, you should be making trades that increase your overall BTC value. That doesn’t mean you need to hold exclusively BTC, but your goal should always be to improve the overall value of your crypto portfolio in terms of BTC. If you’re not increasing that number—even if the dollar value of your holdings is increasing—it means you’d be better off just buying and holding BTC (which might be the right move for many).

Buy Low and Sell High?

Well, yes, duh, you should always be looking to buy low and sell high. However, I’m of the opinion that it’s much, much tougher to recognize peaks and valleys in cryptocurrency since the market is so much different—and likely irrational—than something like the stock market. Given that so much of the value is speculative, short-term price fluctuations—especially for many altcoins—are more so a reflection of hype than underlying value.

As an example, let me tell you a little story about a coin called SAFEX. I bought a decent amount of it in early August. Why? I don’t even fucking remember. It was probably awful reasoning.

A few days later, I went golfing with some friends. I shot 54 on a nine-hole Par 3 course, by the way, even though I used three balls and wrote down the best score on each hole. I’m no Kim Jong.

We started golfing at like 10am and by the time we finished at around noon, SAFEX had skyrocketed like 4x or something crazy. Why? No idea. Had I checked in halfway through that rise, I probably would have “sold high” and missed out on a lot of money.

This has happened in the opposite direction, too; when China banned ICOs, I bought a bunch of BTC after it had dropped quite a bit…only to see it decrease like 20% more.

Anyway, my point is that trying to time trades over small windows of time is very challenging. I’m all for buying and selling based on hype, but don’t get cocky in thinking you can identify highs and lows.

Buy now.

Related to this idea is your strategy for timing your buys. I’ve seen a lot of advice that looks something like this…

Again, I think recognizing the bottom of dips when they’re happening is much more difficult than people think. Either way, the only reason you should ever be waiting to invest in any coin that you think will appreciate long-term is if you think there will be a short-term dip. Otherwise, if you think it’s a good investment, you should be buying as much as you can possibly stomach right now. If your portfolio changes and you want to purchase more in the future, you should again buy as much as you can take on then, too. It doesn’t make sense to invest at regular intervals unless that’s all you can afford to put in each time.

If you look at the graph above, yes, you’d be slightly better off buying at those dips than the peaks that came before them. But you’d be much better off if you just put all the money in from the start. Hell, you could completely miscalculate the timing and invest all of it at the first peak and still come away much better off than saving money to buy dips.

If you’re bullish on a crypto, the only reason to wait on investing everything you can is if you think there’s a short-term drop in store.

Buy early, sell early.

The best approach with BTC, if you believe in its long-term outlook, is to buy, hold, and don’t worry about short-term fluctuations in value. If you you’re actively trading coins you don’t plan to hold “forever,” however, you obviously need to have some sort of strategy with when you plan to buy and sell.

“Buy the rumor, sell the news” is a popular phrase in trading. One example of how I fucked that up is with Legends—that token I referred to that you can use in certain Vegas strip clubs. I had seen some data on the value of LGD increasing prior to big boxing matches in Vegas, so I bought a bunch a couple weeks prior to the last Mayweather fight.

Was that smart? I have no idea what the “true” value of LGD might be, but I did know there was some buzz beginning to pick up on Reddit about how it would increase as the fight approached. In that instance, I didn’t really care too much about what LGD was “worth” in some absolute sense—just what other people would think about it short-term. I bought it at around $1.50 and it was above $4.00 at one point.

An important part of this, of course, would be figuring out when to unload it, unless you find it prudent to be a long-term holder of a strip club currency. And hey, I don’t know your life habits, maybe it is.

For whatever reason, I decided to sell a little bit of LGD the morning of the fight—which was smart—and hold onto the rest. I don’t know what I thought was going to happen—that it would soar that night?—but it started to tank that afternoon and night as those speculating on it began to unload. I was at the DraftKings MLB Championship and not really paying close attention, which—and this is unfathomable—ended up being a #badidea. Turns out when you’re hoarding strip club tokens you think are going to plummet in value in a matter of hours, you do want to be paying attention to what the fuck is going on.

Anyway, in most cases with coins like LGD, it’s better to unload too early than too late if you think their current value is highly inflated due to hype. Even if you believe there’s a chance for more gains, at a certain point, the upside is certainly not worth the risk.

You can be greedy, but don’t get too greedy.

A few other random tips I am going to list but don’t have time to talk about at length…

If you’re unsure if you should make a trade, don’t.

You should have a good enough reason to buy, sell, or trade that you’re confident you need to do it.

There’s no single portfolio allocation right for everyone.

This is dictated by your bankroll, risk tolerance, and available time, among other things.

Know how coin types and correlations affect your volatility.

Certain coins tend to move in unison, while others are negatively correlated.

Keep your emotions in check.

This is incredibly important. You’ll almost always feel overconfident after a good trade and like a moron after a bad one. That’s natural. Don’t let it affect your decisions. Most of what’s perceived as skill (or a lack thereof) is just randomness.

Okay, I’m gonna go eat now. My next post will be a follow-up to my article 40 Counterintuitive Tips for Building a Business.