I’m back in Bali after a weekend trip to a nearby island for my girlfriend’s birthday, Nusa Penida. I left my computer at home Friday-Sunday, and was happy to see that none of my trading programs malfunctioned (I did put strong safeguards to ensure they wouldn’t), and even made a little money without me looking at the markets for a few days.
Nusa Penida had stunning nature, abundant aquatic wildlife (a large Manta ray swam right under me!), but also extreme tourism that made things hard to enjoy at times (when that Manta ray swam under me about 50 people began kicking, pushing, and in general panicking as they surrounded me. I’m not sure if they were trying to get a good look at the Manta, freaking out from getting stung by the plethora of jellyfish that they didn’t realize could hurt you, or just trying not to drown as most of them seemed like it was their first time in the ocean).
The roads of the island were some of the worst I’ve ever seen. I ride a scooter around Bali daily, and feel pretty comfortable on it, but fortunately we hired a driver with a car (not that much more than renting a bike). Every hour I saw tourists with bloody knees, bloody arms, hurt shoulders, etc. from attempting to ride around an island with potholes, surprise rock formations, and narrow lanes without expert third-world motorcycle skills. It was also very difficult to eat quality food, especially with my transition into a carnivore diet. It’s a little embarrassing to order 3 tiny plain omelets, let alone stomach it, and still need way more food. I finally gave into carbs and even some ice cream to get calories (I wasn’t ready for a 3 day fast yet), but got back to proper nutrition when we got back to Bali.
With the bad out of the way, the highlights made up for the moments when I questioned why I was stuck in a tourist trap. Keliking beach, Diamond beach, the view from the treehouse we stayed in, and seeing massive fish while snorkeling (including the Manta ray) were all exceptional. If I went back I would only go to those places and skip everything else.
I watched a video of James Simons , https://www.youtube.com/watch?v=srbQzrtfEvY
one of the most well-known and successful hedge fund managers of all time. He has retired from his hedge fund to go back to pursuing math and philanthropy, but I got a little inspiration for my own quantitative operation. He is still tight-lipped (at 81 years old!) about the inner workings of his fund, but the generalities sounded very similar to what I’m doing. They have something like an 80% a year average return (before fees which are around 50%) for a few decades now, which sounds to me like a good target to shoot for. I don’t know that I’ll be in this for THAT long, especially if I have a fraction of the success that he has had, but it helps me to know that there is someone out there with that much success.
I remember years ago (sorry I have told this story before in previous blogs, but it feels pertinent yet again) when I started playing high-stakes poker I was doing ok, but never got that far into the plus. I kind of just thought that everyone was either breaking even or losing, but one night a friend who left the circuit told me how much he had won that year (many winning players will lie about losing money, but admitting to winning from a semi-pro is only something done in either extreme confidence, or when they are no longer in the game). It was a massive amount, and I had no clue that was even possible, let alone happening. It all made sense though, and once I knew that, I started winning much more regularly myself. I felt a little bit the same way after watching the Jim Simons video. There wasn’t any strategy advice (besides hiring the best scientific PhDs you can get, which isn’t something for me), but just the confidence that he had in finding new data, new strategies (they always erode away over time), and knowing that if they put in the work they will be successful. Contrast that to the average hedge fund that makes huge on some large bets, and then slowly withers away over the next few years from overconfidence and their luck returning to normal.
With the new inspiration (and some luck) I stumbled across some modifications to one of my strategies that seems very promising. I made a mistake in one line of my hundreds of lines of code, which took 2 days to diagnose (it had me making too much money on historical trading, which of course I wanted to believe, and had all kinds of made-up stories in my head about why it was probably real), but the mistake led me down a weird line of experimentation that’s been leading to exciting (and weird) new strategies.
I also wanted to share something that’s been very helpful that I’m starting to use again, but forgot about. Back when I played poker (I guess my years of poker left me with something useful outside of staying up until 3 am with fellow degenerates on weekdays), I normally only played once or twice a week, and went months/years without playing. Of course I became very rusty, didn’t know the latest strategies, and needed extreme bursts of information to play at a high level when playing so infrequently. My solution was to watch online poker strategy videos from top players, who were often playing 4-8 games at once. This allowed me to mentally absorb thousands of hands played in a few hours time, but also importantly it was passive learning.
With a full-time career, girlfriend, friends, working out, and then the actual playing of poker, I didn’t have tons of mental energy in reserve. It’s well documented that active learning is superior (something like playing a hand of poker online, and then running it through simulations to see what a computer program thinks is theoretically correct), except for it takes energy and will-power. Passive learning (watching someone else do something) doesn’t allow you to retain as much, but if it comes down to vegetating with ESPN highlights of games you realize you couldn’t care less about, or watching a video of an expert explaining their craft, you’re probably going to get more out of the latter.
Recently I started using the app Freedom, which I use to block my time-waster websites during the day ( I often don’t have the willpower to not click them), but I didn’t block Youtube because I didn’t go there often. I invariably run into times when I’m running machine learning experiments that take 5 minutes-2 hours, and I don’t like starting and stopping a book. I realized I could access Youtube, and started sneaking in poker videos to pass the time. Eventually I ran out of junk to binge on, and cracked open a programming video. I enjoyed it even more, and actually started my passive learning up again! Watching other people do machine learning gave me new ideas, taught me things, and helped my brain relax a bit while I’m doing the heavy experiments on the side. It doesn’t get any nerdier than watching people code, but I’ve got to embrace my new identity. I’m sure there are cooler things for the rest of you to watch on Youtube if you want to relax a bit, but don’t want to consume pure brain goop like most social media.
With that I’ll leave you with a few pics from the weekend and get back to my experiments and nerding out. The first is the birthday girl at Penida Bambu Green Villas (our first night), the second and fourth are pics of Keliking beach (sorry almost the same exact pic), and third was the view from our treehouse in the morning on the east side of the island overlooking Diamond beach.