Tungsten prices have risen almost 800% so far this year, which, as with any other commodity price increase, benefits anyone who happens to have stockpiled it earlier. One group of investors who diversified into tungsten a few years ago were crypto people, who started buying tungsten cubes as a joke. One prominent crypto person, who was fond of the "yes-and" model even when the right answer was "definitely not," bought an enormous one for $250k. So he's up a bit on that. It's not his only case of inadvertently being in the right information flow: $500m into Anthropic in 2021, a 2022 investment in SpaceX via an SPV, a $200k pre-seed check into Cursor which has also turned into a few billion dollars worth of SpaceX equity.

It's a great track record, only marred by the fact that he was doing this with money that belonged to customers, not telling them about it, and ended up with a big pile of illiquid assets backing ostensibly-liquid customer accounts during a crypto downturn. Once you do that, it doesn't really matter how good your investments were. SBF could have been part of the broader archetype of people who got nerd-sniped by systematic investing in the 2010s and then by AI in the 2020s. That would probably have involved smaller sums, but he'd be experiencing a different form of economic post-scarcity than the taxpayer-funded one he actually has.

There are more benign cases where someone winds up with a surprising amount of money despite not really gunning for it: Google's chef made eight figures from stock options, and the graffiti artist who decorated Facebook's first office made nine. In earlier cycles, there were investors who were cajoled into buying Coca-Cola when it started, people who sold their companies to Standard Oil for stock, various doctors and dentists in Omaha in the 50s and 60s whose great-grandkids will inherit Berkshire class A shares, etc. And there's an even longer tail of people who invested in something for pretty vague reasons, forgot about it, and found out they made a fortune—or who invested for actively bad reasons, didn't sell, and made out okay. And the same kind of randomness affects things in the other direction, too; Julian Robertson finally wound down his fund just before an exceptional run for value stocks, during which the tech companies he'd been ignoring saw their valuations implode and funds rotated into exactly the kinds of decently-valued companies he'd specialized in.¹ Executives at Halloid would advise their friends not to buy its stock; Halloid later renamed itself after its biggest hit, Xerox, and was one of the canonical growth stocks of the 1960s.

This leads investors to two kinds of frustration:

1. It's absolutely maddening to see people make money for a bad reason, and even though it's broadly true that markets get dumber near the peak and that seeing bad ideas turn into big fortunes is a good sign that the market's going to turn, it's very hard to separate that from just resenting people for their success. It's natural to compare yourself to other people, and those people will be pretty similar to you. When a professional investor says that idiots are making fortunes, they might mean that from their 99th-percentile-skill-level perspective, it's absurd that some 98th-percentile analyst caught on to the memory shortage early.²

2. It leads to a lot of negative rumination. How do you know if you're good? Unless you're in a tightly risk-managed and fairly high-turnover strategy, you're still trying to assess your own skill based on a small number of decisions, and you don't have to subtract many specific bets from the track records of the best investors before they're unremarkable. And that risk runs the other way, too: when Warren Buffett put a third of his fund into American Express, the company was technically organized as an unlimited-liability business; if their fraud problem turned out to be deeper than it looked, he could theoretically have lost more than his entire fund.

That calibration question is one that non-investors have to ask, too. There are people who don't know what a 10-Q is, but who do know smart people in AI, and who bought shares of the companies that those smart people depend on or work for. Many of the people who did this, particularly the ones who don't have to work any more and can spend all their time worrying about existential risk, were also unfamiliar with financial arcana such as position sizing and risk management.

It makes the world a lot more interesting that these people exist, and there's a real sense in which they were more skilled at their finance hobby than professionals were at their finance job. (This, naturally, drives the professionals crazy. But if those professionals are users of Excel or Bloomberg, they're tapping into many billions of dollars' worth of programmer-hours; maybe the tech people should have resented them.) There are fairly boring portfolio allocation answers here, like: put enough into index funds that you don't have to worry about retiring, and, if you want to have fun picking stocks, do it with money you don't depend on. That's a good recipe for ending up richer-than-expected because you read the right scaling paper (or, be real: the right Gwern page) in 2020. But it's also a great way for a millionaire to spend a lot of time ruminating on how they'd be a decamillionaire if they'd moved a little more money out of VOO.

So the cruel truth is that if you have sufficiently perceptive friends, and those friends have contrarian-but-correct views about the world that can be expressed as trades, you're stuck in an unfortunate pair trade: the more of your net worth you risk on vibes-based trading, the higher the possibility that you blow up (which might make it a little hard for you to stay friends with the people who gave you bad advice). But, on the other hand, the extent to which you ignore them is the extent to which you're short a psychological call option.

Managing the short-call leg of this trade is all psychological, and there isn't much you can do other than being disciplined enough not to pull up long-term stock charts too often. The other thing you can do is remind yourself that while 100% of Apple was owned by somebody in 2003, and that Netflix shares in 2006 and Tesla stock at the IPO were similarly spoken-for, very few people who owned them held on for a long time. When you see a story about how you much you'd have if you'd put just $1,000 into the right company at the right time, remind yourself that there's a good chance that what you'd actually have is a story about how you put $1,000 into Apple, made $252 in six months, congratulated yourself on being such a genius, and sold. Lucky investors, people who made good gambles, etc. all exist, undeniably, but it's a class that you only get into in retrospect. And even the ones who were good—that Google chef had been the personal chef for the Grateful Dead!—will have outcomes very sensitive to the details of choices they made. It's a wonderful feature of capital markets that they reward information aggregation as much as they do, but the most compelling stories about this are the ones you'll learn the least from.

(Thanks to Trevor McKendrick for suggesting this piece.)

We've covered the question of luck, skill, and retail participation in the market from a few different angles in The Diff, including:

• Asking if it's better to be lucky or smart ($).

• Treating contrarian beliefs as a synthetic option ($).

• How, despite the many opportunities to get ripped off, it's a golden age for individual investors ($).

• Why it's hard for funds that focus on short-term strategies to broaden their time horizon ($).

Join the discussion!

1  In this case, the bad luck was mostly his LPs', not his, and even they might have done well if they'd invested in the same analysts he seeded. Robertson was one of those people who had a hard time retiring; he said his best single month was in the summer of 2007, when he caught some early upside from betting against subprime.

2  Keep in mind that the 99th percentile of investors globally contains 83m people, most of whom do not manage money full-time. Even the washouts at big funds are still going to be close to the edge of the distribution.