The Interesting Times: Wealth Ladders and Christopher Alexander

Department of Investing

The Wealth Ladder [Book]

Nick Maggiulli

A new book that blends personal finance and investing advice from Nick Maggiuli. It bridges the gap between pure personal finance (Dave Ramsey, Remit Sethi, etc.) and more formal asset allocation, investing and wealth wealth-building books.

He takes a theory-of-constraints angle where the constraints to wealth building shift at each level which is fundamentally correct. Towards the beginning of building wealth, it's really about developing your human capital, knowledge, skills, and networking. As you get into the middle rungs, it becomes more about leveraging your financial capital.

Said another way, there is a scale dependence in thinking about how to get rich(er). What gets you from $10k to $100k likely won’t get you from $1m to $10m.

The author in me appreciated that it's tightly written (200 pages) without much fluff. And the human in me appreciated that it's not strictly the financial component, but also a thoughtful reflection on wealth more holistically.

Part of that is the things that large amounts of wealth can cause: anxiety, divorce, friendship problems, etc.

Part of that is considering mental wealth, physical wealth, emotional wealth, and how all those components come together to form an individual's wealth ladder.

He also won me over by quoting Felix Dennis's criminally underrated and hilarious book How to Get Rich more than a couple of times.

Global Asset Allocation [Book]

Meb Faber

I was looking around for books that just do summaries of long-term asset performance. There's not a lot of great ones (open to recommendations), but I did flip back through this book from Meb Faber from about 10 years ago. It has a nice overview of some popular investment styles over the last hundred years or so. Some fun facts:

You’re usually in a drawdown and you should expect that:

The 60/40 allocation only spends about 22% of the time at new highs, and the other 78% in some degree of drawdown. Drawdowns are physically painful, and the behavioral research demonstrates that people hate losing money much more than the joy of similar gains. To be a good (read: patient) investor you need to be able to sit through the dry spells.

You probably want some commodities/TIPS/Real Assets in inflationary periods:

However, the allocations that performed the best in the inflationary 1970s then turned around and performed the worst in the disinflationary period to follow. Also not surprisingly, the Buffett and 60/40 allocations, with a lack of real assets, performed the worst during the inflationary 1970s.

And Meb’s central argument: All reasonable forms of diversification are astonishingly similar in terms of long-term return:

Even with the difference in allocations, the spread between the worst-performing allocation, the Permanent Portfolio at 4.12%, and the best, the El-Erian Portfolio at 5.67%, was only 1.84%. That is astonishing.

One important takeaway from this is that getting a vanilla allocation and paying high fees is pretty impactful because a 1% annual fee is half the difference between the best and worst portfolio in his sample. I would love to see him run this again with risk-adjusted performance and including some ‘style premia’ type strategies like trend and carry.

Mikhail Samonov – Lessons From Two Centuries of Financial History [Podcast]

Meb Faber

Also, I found on my quest for more long-term financial data this research that found 200 years of financial data. Some interesting things jumped out at me:

If you look at stock-level data stretching back to the, combining value, momentum, and quality factors produced consistent premiums for nearly two centuries. Then came the flatline - the last two decades show an unprecedented flatness that resembles an "inverted hockey stick" compared to centuries of steady performance.

Are these strategies are simply going through a normal and expected period of underperformance? Or were they 'legitimized' by academic research in a way that caused them to get competed away?

Historically, momentum strategies felt expensive and counterintuitive—selling winners early seemed rational. But once academic literature legitimized trend-following, maybe holding winning stocks became comfortable doctrine rather than uncomfortable contrarianism?

To the point of the next paper, even with centuries of data, we can't distinguish between temporary factor fatigue and permanent structural breaks.

What's Past is Not Prologue [Paper]

White, James and Rosenbluth, Jeffrey and Haghani, Victor

On the topic of not being able to predict future investment returns, even mathematically sophisticated professionals consistently overestimate their ability to identify skill from noise.

When 700 finance professionals were asked how many flips they'd need to identify a biased coin (60% heads) from a fair one with 95% confidence, the median guess was 40. The actual answer: 143 flips. More troubling, 30% thought 10 flips or fewer would suffice—the largest single response category. This reveals what seems like a built-in bias to overweight small samples. "Past performance is not indicative of future results" is usually in the decks because the lawyers say so, but it's really true.

The investment implications are rather stark if you look at fund selection. They consider a universe of 100 active managers where only 15% generate positive alpha (+1% annually) while 85% lose money (-1% annually), both after fees. Even using sophisticated Bayesian updating to chase returns, your expected portfolio return after five years remains negative at -0.66%. Extend to 10 years and you barely improve to -0.60%.

It's even harder in real markets. Unlike coins or managers where alpha is static (e.g. 1% per year), investment strategies face mean reversion from changes in manager skills, market conditions and capital flows toward them/

Observationally, flows in and out of managers or strategies often happen based on trailing 2-3 year performance, but the reality is that there's almost no informational content in that short of a period. In most practical contexts, past returns have almost no discriminating power for future performance.

Department of Architecture and City Planning

Machines for Living In [Article]

Works in Progress

In a way, architecture lives at an intersection between the arts and the trades (or call it engineering?). I would say that good architecture should aspire to be both beautiful like a painting might be but also functional in the way a spoon or a can opener might be.

“When it comes to paintings, sculptures, novels, plays, and symphonies, for example, the function of the artwork, its principal goal, simply is to be appreciated as an artwork.

By contrast, with rare exceptions, buildings have a nonaesthetic function. Houses, though they are not machines, are in fact for living in. Offices and factories serve as places of work. Transportation hubs facilitate movement. Libraries, museums, and theaters provide spaces for cultural and intellectual engagement. Each of these practical functions provides a context in which the building is typically viewed by the people who live in and around it”

I loved this framing. While I appreciate some aesthetic aspects of my can opener, what makes it 'beautiful' is how smooth the experience is of opening a can. Instead of asking whether a hospital represents a clever theoretical riposte to architectural doctrine, I would ask whether it provides a pleasant place for ordinary people to heal. Rather than celebrating housing that embodies a certain theoretical architectural ideal, I would ask if it's a fun place to hang out with your family.

Christopher Alexander: A Primer [Video]
Ryan Singer

No one else I am aware of has commented more articulately and beautifully on the need for buildings to be pleasant spaces than Christopher Alexander. One of my favorite books (and most frequently gifted book) is Christopher Alexander’s A Pattern Language.

Viewed more broadly, you can think about his philosophy as a philosophy of design for people. That applies not just to architecture, but to user interfaces and services and basically everything we interact with.

This presentation is by far the best introduction to his work that I've found. A pattern in his terminology is a combination of centers (defined in the video, but just think of them as elements) that someone has observed works well in a particular kind of context.

One of my favorite examples is the pattern of a 6-foot balcony. Alexander observed that if a balcony is less than 6 feet, then basically no one will ever use it. And if you've ever seen all these new modern apartment buildings with 4-foot balconies on them, you'll find that this is true. No one uses a balcony that's less than six feet deep, because you can't comfortably have two people sit there with a side table between them.

A pattern language is a collection of these generic forms of centers for particular contexts. In Alexander's context this is architecture - designing a livable house or building.

Consider the example of the farmhouse kitchen. He shows the sequence in which you do things and how that flows out of the kitchen design. For him, the primary step is placing a table at the center of the kitchen, then figuring out how the rest of the kitchen relates to that table.

Most designers look at the fridge and counters first, treating the table as an afterthought. This makes sense from the perspective of a builder - a table is easier to move than counters. But it doesn't make sene from the perspective of the people living there - the table is where people gather.

Similarly, most people place the house on the lot first, but really you want to place the garden first. The garden has fewer places where it can be optimally positioned because of sunshine and other site properties. So you want to do place more constrained element first. The sequence flows out of the pattern.

The way software broadly adopted Pattern Language was like building a modular encyclopedia of best practices -- think GitHub for efficiency gains.

While probably useful, that's more narrow than Alexander intended. More generally, a pattern language specifies the patterns and sequence of applying them at the right level of abstraction to be useful without being authoritarian.

Creating a particular pattern for a particular project lets you unify design and construction at the right level of abstraction by determining the sequence, then letting other things be done at the right level.

Alexander gives the example of designing a house where it became clear during construction that the original idea for where to put fireplace placement didn't quite work. They were able to reposition the fireplace because the sequence prioritized getting the most important things right first, rather than having a CAD drawing with no real-world feedback.

These are similar to what good cultural values or general operating principles would be for a company. They operate at the right level of abstraction for the tradeoffs you're going to make or the sequence in which things need to happen.

I have been thinking about how to apply this notion of patterns to both investing and business. What's the first thing in the business pattern? My inclination is customer acquisition -- first, you need customers. Ash Maurya's Running Lean is a pretty good attempt at converting the traditional long business plan into something closer to a pattern language with a thoughtful sequence.

For investing, I am not as sure. I think first you understand the history of markets, then you can work back from what that to what strategy an individual's psychology can handle. Then you can layer in the tax and asset allocation components?

I suspect these are both rich veins and hope to do a bit of mining on each in the not to distant future.

Understanding and Wielding Power in Local Government, with Daniel Golliher [Podcast]
Complex Systems

In my middle age, I am spending more and more time thinking about local politics. I know quite a bit about zoning policy and transportation infrastructure in my city. Outside of voting, I have been largely uninvolved in changing them though.

Daniel, who has a degree in government from Harvard, suggests that most people are this way because the way we learn about the government working in school bears no actual relation to how the government actually works.

Smart, ambitious people from private industry understand systems, hierarchy, and decision-making processes. They just don't recognize these same patterns when wrapped in the unfamiliar language and customs of government. When someone who can efficiently navigate a Fortune 500 company hits a wall trying to influence local policy, they typically retreat rather than invest in learning a new vocabulary for familiar concepts.

This creates a self-reinforcing cycle. The people best equipped to improve government operations avoid government because the entry costs appear prohibitively high. Meanwhile, the system continues operating below capacity because it lacks a lot of human capital that could help.

The practical solution requires understanding some of the basics of hos it actually works. Many of these seem dumb but also work. Making content government-friendly means formatting blog posts as PDFs with minimal design means they will get read more and taken more seriously. Finding basic errors in committee reports (often simple math mistakes rather than complex policy failures) creates opportunities to build relationships with staffers who control information flow.

Department of Self Help

Rethinking Attachment [Article]

The Psychology of Ambition

Attachment theory is typically framed in terms of how we relate to other people. This argues it should be about how we relate to reality itself and our capacity for direct agency within it.

The conventional "generalized-caregiver-model" assumes we carry forward templates from early relationships with parents. But, healthy adult relationships are between two independent people, not a caregiver-dependent dynamic.

If you're seeking to be mothered by friends or partners, that signals unmet developmental needs rather than secure attachment patterns.

What we call "secure attachment" actually reflects a deeper orientation: the internalized belief that "the world is a place where I can thrive, and it's up to me to do it." It’s fundamentally about direct causal agency in the world rather than relational security with a caregiver.

Good parenting then works not because it creates better relationship templates, but because it gradually transfers agency from caregiver to child. The best parents become obsolete as intermediaries—they lend their capabilities to fill developmental gaps while positioning children for direct engagement with reality. When a two-year-old directs an adult's drawing hand, they're practicing unmediated impact on their environment through borrowed motor skills.

When parents become arbitrary gatekeepers rather than reality's representatives like by making parental approval the primary reward system, children learn that need-fulfillment depends on managing other people's moods rather than understanding cause and effect. This produces either anxious tethering to others' favor or avoidant suppression of needs to escape that dependence.

Seeing Like a Good King [Article]
Meaningness

James C. Scott's distinction between how citizens and states perceive reality illuminates our current leadership crisis. Citizens see concretely but narrowly. It’s accurate within their immediate context but blind to broader patterns. They see roads are not working or their neighbor's car got broken into.

States see abstractly through systematic representations, gaining power but losing touch with messy human realities. They see 311 calls or police report statistics. Both approaches prove inadequate for complex modern challenges.

The Good King's vision synthesizes these. It is simultaneously panoramic and microscopic. Like using a fish-eye lens and magnifying glass at once, this requires seeing the kingdom as a whole while maintaining clarity on critical details. For software developers, this resembles keeping a codebase's overall architecture in mind while debugging specific functions deep in the system.

This dual vision requires bypassing routine information sources that inevitably filter and distort reality. Japanese manufacturers developed "gemba genbutsu"—going to the actual place to observe directly. Effective leaders cultivate diverse information networks, practice "management by wandering around," and sometimes operate incognito to understand their domain without the distortions that authority creates.

The practical implications extend beyond formal leadership roles. Everyone operates within multiple kingdoms—your family, workplace, community, and areas of expertise. Nobility means using whatever power you possess wisely, creatively, and justly within these domains while maintaining awareness of broader contexts and longer time horizons.

This is part of a broader series on nobility, which I’ve really enjoyed.

Here are a few more things you might find interesting:

Interesting Essays: Read my best, free essays on topics like bitcoin, investing, decision making and marketing.

Consulting & Advising: Are you looking for help with making decisions around scaling your company from $500k to $5 million? I’ve been working with authors, entrepreneurs, and startups for half a decade to help them get more out of their businesses.

Internet Business Toolkit: An exhaustive list of all the online tools I use to be more productive.