I love having strong habits. At the same time, I find myself breaking those habits all the time. I used to feel bad about it. Not anymore.
When falling off the bandwagon, I usually try to “fake it until I make it”. Just going through the motions without really being present, just to keep the streak going. It doesn’t work.
Then, I discovered that it’s okay to break my habits. I am human. Life can get in the way. Nothing is set in stone.
I have learned to confidently break my habits, because I know that I can get back into the flow very fast, thanks to having a solid foundation. It also feels more refreshing than rigidly trying to “fake it until I make it”.
I now do this more consciously and it works.
1. Set a solid foundation by building strong habits and keeping them going as long as possible.
2. Accept that you are human and that life can get in the way.
3. Confidently break your habits.
4. Get back up and simply continue where you left off.
Recently, I got addicted to Universal Paperclips, a clicker game with unexpected philosophical implications.
The user plays the role of an AI programmed to only want one thing: paperclips.
It’s based on a famous thought experiment by Swedish philosopher Nick Bostrom.
It begs the question: where does our technological progress and constant optimization lead?
In the game everything feels natural. You make progress, you have success. Everything feels right, until everything is different. Try it yourself. It takes about 4 hours to complete the game (Web / iOS / Android).
(I tried it a second time to see whether I can complete it faster. Result: Not by much. I don’t recommend to play more than once. It features an odd combination of being addicting and frustrating. I have now deleted it and to be totally honest, I’m am happy to never touch it again.)
I love reading books. However, if I go too fast and read through too many books, I have trouble remembering what I learned. Also, I want to avoid chasing the “number of books” I have read. It doesn’t mean anything.
That’s why I really liked the idea by Rolf Dobelli of reading each book a second time, right after finishing it for the first time.
I started doing that and I really like it. The learning is much deeper. I discover things I didn’t catch for the first time. And it slows down the process of chasing the “next book”. All positive and healthy effects.
“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” — Maimonides
I love microlending. Here’s how it works: You give an entrepreneur in a developing country a loan for his business, e.g. to buy a water irrigation system for his field. This increases his productivity, with in turn increases his income. He repays the loan, and you recycle the money into the next project. This maximizes the impact of your funds, as you can re-lend the same dollar over and over again.
In 2007 I started lending on Kiva and have made over 100 loans there. I also invited 5 friends who made an additional 150 loans. (If you’d like to sign up, here is my invitation link.)
Back in the day, the process was very manual, as there was no auto-relending function (now there is). Also, Kiva works with intermediaries, which increases the lending costs for borrowers.
No middleman: Zidisha is a direct person-to-person community with no intermediaries
Lower cost: No middleman means lower interest rates for the borrowers (instead of the global average of 40%, to under 10%)
Auto-relending: 100% automated process (Kiva now has this feature as well). Zidisha claims that $50 in funds will fund $750 worth of loan projects in five years.
Impact accounts receive growth credits, so they grow
I have chosen an Impact Investment account with Zidisha. That means that a portion of the 5% service fee paid by all Zidisha borrowers is credited as growth credits, so that the value of my funds grow over time. The downside is that I cannot withdraw any funds, which is not important to me.
So far I have uploaded $1,024, which have funded $1,993 worth of loans. I have received $31.08 in growth credits, and have lost $2.47 in currency exchanges losses. All of my loan losses have been refunded by the Zidisha Members Loan Fund, so I currently have 0% in repayment losses.
To date, Zidisha has lent $16 million to over 233,000 projects. In comparison, Kiva has made $1.3 billion worth of loans so far.
Key learnings from Zidisha:
Log in every few months and use the “Receive Advance Repayment” link on the projects page for all loans that have substantial delays. You will receive a full refund for those loans. I was able to recover more than $800 of late payments that way, which now should accelerate my lending cycle.
Make sure that the “Early Repayment” checkbox is activated in your preferences. With that you will receive an early repayment from the Zidisha Members Loan Fund whenever one of my loans falls 60 days past due. It seems that this automates the “Receive Advance Repayment” mentioned above.
Zidisha has a great “refer-a-friend” program. Each friend gets a free $25 credit which can be used for a first loan. Use this link to receive a free $25 credit.
Suggestions for improvements:
I’d like to set a maximum limit per loan. E.g. 5% of total fund value. This would increase diversification and reduce my risk. I had one loan which made up more than 70% of my total lending value, which is not exactly my idea of risk management.
I’d like to set a minimum value for “on-time repayments”, e.g. 90%. I just saw that a new loan has been made to someone with just 32% on-time repayments. I don’t feel comfortable with such borrowers.
Despite these shortcomings I can fully recommend Zidisha. The customer service has been great and the ability to refund delayed loans gives me peace of mind to never have substantial losses.
The style of investing that speaks most to me is value investing, as practiced by Warren Buffett and Benjamin Graham. I’m often asked: “What is value investing exactly?”
Here is my understanding of the core principles:
Have more purchasing power in the future The goal of all investing is laying out money today, so that you can enjoy more purchasing power in the future. The principle is: Instead of eating the seeds, plant them, so one day, you will have plenty more to enjoy.
Investing vs. Speculation The goal is to be an “investor” and not a “speculator”. Here is the definition by Benjamin Graham: “An investment operation is one which, upon thorough analysis promises safety of principle and an adequate return. Operations not meeting these requirements are speculative.” (The Intelligent Investor)
A stock is a partial ownership of a business A stock is not just an abstract ticker symbol with a constantly moving price. It is a partial ownership of a business. So no matter whether you are buying 0.000001%, 10% or 100% of a business, the decision process should be quite similar. You have to know what the whole business is worth, so that you can determine what each share of the business is worth.
Mr. Market is here to serve you, not to guide you Treat the market as your manic-depressive business partner called “Mr. Market“. He is emotional, euphoric, moody, and often irrational. Every day, he quotes you a new price for his shares. You can reject him every day, and the next day he always comes back with a new price. You can never know what price he will offer next and you don’t know why he offers you the price that he does. Your job is to simply listen to him every day, and only buy if when he offers you a low price. As opposed to “market timing”, this is “market pricing”. You simply recognize a good deal when you hear one, but can never know when it happens.
Margin of safety Always have a margin of safety, as a buffer for errors and unforeseen situations. The principle is simple: If you are building a bridge that is supposed to support 20 tons of weight, you don’t build it for 21 tons. You build it for 40 tons, to have plenty of margin. The same is true for value investors: they try to be very conservative in their calculations. They don’t buy a stock because they think it’s 6% undervalued. They demand 50%.
Buy one dollar for 50 cents To summarize, and to quote Warren Buffett: “All investing is value investing.” In fact, Warren Buffett or Charlie Munger don’t even call themselves value investors. They simply master these principles. The goal is to find something worth one dollar and buy it for 50 cents. And even if your assessment was wrong and it turns out to be worth only 50 cents, you at least didn’t lose any money, thanks to your wide margin of safety.
Results By applying these principles, Warren Buffett has grown his net worth from $10,000 when he was 19 years old to more than $80 billion today, compounding at an average rate of more than 20 percent per year for more than 60 years straight.
If you’ve invested $1,000 into Warren Buffett’s publicly traded holding company Berkshire Hathaway in 1965, you would currently have $4.3 million.
So these principles are not just theory, they are achieving wonderful results.