Bridge of Asses

In year 5 of this online writing adventure, I will continue my annual tradition of shutting down for the holidays. I get to recharge that particular battery and readers who complain that they are behind can catch up if they so care.

This post is an organized recap with a few “user notes”.

Personal Favorites

1. The Worst Game Ever Made: This was a journey down the rabbit hole of Georgism which I basically think is the platonic ideal of capitalism. California’s eventual future, with its disparity between haves and have-nots, is a Central American country with drug-lords digital addiction merchants’ compounds surrounded by beggars. It is also glaring to me that it is the epitome of anti-Georgism with a tax code that perpetuates a landed gentry. Remember vassals, send your landlord a holiday card. CRE is in the dumps and those low fixed-rate mortgages are a year shorter in duration. They can use the cheer.
2. Sentimental: A letter to my son on his 10th birthday. Children are humbling.
3. Born On Third: Hating on nepos is an American sport and I don’t want to deny anyone a good time. But genuine envy of rich kids is resource curse amnesia. This post is about what it really means to be born on third.
4. The Alpha Player Problem: Games contain an elegant metaphor for common organizational behavior malfunctions

In 2023 I created or made substantial additions to these portals:

1. Affirmations And North Stars
2. Moontower Money
3. Moontower Brain Plug-In

Money Angle

I wrote a lot of educational posts this year. It’s affirming to find out that the Moontower treatment of this material:

• helps readers break through a learning barrier
• is used to train juniors
• inspires novel thoughts in adjacent contexts

Moontower’s Top Money Education Posts from 2023:

Understanding Return Math

1. Examples Of Comparing Interest Rates With Different Compounding Intervals
2. Understanding Log Returns
3. Geometric vs Arithmetic Mean In The Wild
4. Well, What Did You Expect?
5. A Simple Demonstration of Return Vs Volatility

Nuances of Measuring In Options

1. Using Log Returns And Volatility To Normalize Strike Distances
2. Understanding Implied Forwards
3. Understanding Variance Time
4. You Think You’re Trading Vol But Are You Even?

Financial Reasoning

1. Mock Trading
2. It’s Not The Merit, It’s The Price
3. Insights From The Warrant Puzzle Via Financial Hacking
4. The Beauty Of Option Theory
5. The Creep Of Arbitrage Means Investing Is Mostly A Faith Exercise
6. I’m Not Saying Do This Going Forward

Hands-On Socratic Tutorials For Basic Option Concepts

1. A Socratic Dissection Of An Option Trade
2. The Snake Eyes Option
3. What We Can Learn From Vertical Spreads
4. Covered Calls Are Still Just A Vol Trade

Practical Investing Topics

1. Reasoning Through A Housing Trade Out Loud
2. On Active Management And Private Investments
3. BOXX: Access Options Funding Rates in an ETF
4. I Tried To Buy TIPS And Failed

Money Angle For Masochists

I added Money Angle for Masochists to the letter this year. The alliterative phrase is going to stay but only because I didn’t know I should have called it the “Bridge of Asses.”

In A Coder Considers the Waning Days of the Craft, James Somers writes:

Medieval students called the moment at which casual learners fail the pons asinorum, or “bridge of asses.” The term was inspired by Proposition 5 of Euclid’s Elements I, the first truly difficult idea in the book. Those who crossed the bridge would go on to master geometry; those who didn’t would remain dabblers.

Wikipedia says the pons asinorum or “bridge of asses” is:

used metaphorically for a problem or challenge which acts as a test of critical thinking, referring to the “ass’ bridge’s” ability to separate capable and incapable reasoners.

The entry later states that economist John Stuart Mill called Ricardo’s Law of Rent the pons asinorum of economics.

Well…that’s just because he didn’t live to see option theory. I don’t mean the math details. I mean the conceptual rails of looking at a web of branching future payoffs, seeing how they could be replicated, and measuring the cost of that replicating portfolio today. It is the formalization of finance’s deepest truth — you cannot eradicate risk, but only change its shape.

At least Dall-E didn’t spell Theor-E

With that, I push you onto the bridge.

[As always, I write these with a motivated high schooler in mind. I’m not sure I always get here and I do think these would be well adapted to video explainers but it’s just hard to prioritize that.]

1. Understanding Risk Neutral Probability
2. The Intuition Behind The Black Scholes Equation
3. The MAD Straddle
4. Short Where She Lands, Long Where She Ain’t

Each of these posts is a little world of editorials embedded in explanations. I want to bring extra attention to Understanding Risk Neutral Probability because its editorials pull in ideas that are profound but relatively underexposed.

Within that post you’ll find:

👽Real World vs Risk Neutral Worlds

🌷Appreciative Reasons

🎺Instrumental Reasons

Final boss

My response here is a useful test of your understanding of some of these concepts. Can you identify the posts that best embody my claim?

Stay groovy ☮️