Considerations toward an antifragile, crypto-focused empire
For the individual Investor / Trader
Mindsets for curating a well-diversified portfolio deep in 2022 & beyond …
Hello all. I thought I’d take a bit of a detour in this article and expand on a recent tweet I posed a few weeks back. In the tweet, I briefly touched on a high-level thought process regarding individual portfolio modeling, marked and characterized primarily by diversity vs narrow-band thinking. More specifically, it details how I view an ideal approach towards curating a crypto (& overall) strategy for the individual, and how it might work best when designing a portfolio based on a core tenant of anti-fragility. Moving a bit deeper into 2022 - I feel these considerations may become more important than they had in recent past. I hope this can help others and serve as a sort of reference in the current times we find ourselves in, enjoy.
First, let us define antifragility for a moment.
According to wikipedia , Antifragility can be defined as a property of systems in which increase in capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures. A key takeaway of Anti-fragility is that it not only withstands a shock (in our case, panic/crisis/risk), but actually improves due to it.
Now that we have established a definition of Antifragility, we can easily surmise an opposite definition for fragility; something which breaks down in the face of a small order of stress, challenge or adversity.
Now that we have our simple idea of Fragility and Antifragility, as prudent stewards of our own individual wealth, we might pose the next obvious conjecture - that being : what / or how would it make sense to build a more-than robust portfolio, based on core tenants of antifragility. Worded another way, how can -we- become a bedrock of antifragility?
Importance of wealth durability, reliability in the current context of financial fragility ...
Why would we care about asset diversification, ‘ wealth reliability ‘ or anything else marked as prudent, when we can simply sit back and gamble high risk alternative investments all day (see memecoins) ?
Segueing a bit, In a word : The entire financial system, regulatory system, etc continues to increase in fragility over time. It’s simply a nature biproduct of increasing complexity. For every new law, every new financial product, every new ‘middle-man’, the organism that is the global financial system (including derivatives, central banks, govs, everyday working class folks, public & private, retiree, etc) continues to grow more vulnerable to risks - risks of collapse, risks of panics, risks of waring between factions with different belief sets.
The fact is, we are currently in the longest financial expansion (not including the recent covid short-term mean reversion in march of 2020).
This fact becomes increasingly critical to pay attention towards as we move closer & closer to the next great global financial crisis, whatever and whenever it may be, which may be long overdue, as seen in the referenced chart above by the National Bureau of Econ. Research (BEA).
With these notions of fragility, antifragility, expansion & contraction firm in our minds, I’ve decided one of the best ways to confront these realities we face is to build a life based upon firm tenants of antifragility - in order to derive best outcomes for both portfolio and individual health. At the end of the day, it’s much easier to arrive at wealth by remaining with our health not only intact, but thriving as well.
Although many consider crypto to be a ‘ risk asset ‘ (that being, one to avoid during a crisis or panic), I do feel it prudent to include as a core focus in any progressive portfolio that wishes to maximize growth. Crypto continues to remain at the frontier of innovation, creative destruction and growth - still in its growth and adoption phase (think asymmetric returns), it thus becomes paramount to remain focused on its untapped avenues for growth in areas such as play & earn, metaverse, defi, and others.
What follows are 10 considerations and associated avenues, traits & methodologies to incorporate that I’ve found contribute towards building an antifragile portfolio (one that withstands, improves, and optimizes), while retaining and incorporating crypto as a core focus.
( 1. ) Acquiring initial start-up / ‘ seed ‘ capital
Before we get into subsequent considerations - first we must have capital to start our investing journey. If you already have a high net worth, this may need not apply to you. For others, you may derive a great deal of benefit via increasing your initial capital reserves, either through means of direct income streams, or otherwise.
Outside of crypto, this may include :
Standard 9-to-5; or more generally, whatever translates or utilizes our stored knowledge capital into currency or monetary capital. Avoid things that rely too heavily on direct physical, mechanical, or routine work - although potentially profitable, more often than not these are the first jobs to be automated, marginalized, and contain a quality-of-life (work tasks) much lower due to the lower bar to entry (less knowledge capital required); thus pay will be lower vs effort & competition increased. Look for capacities that require specialized knowledge with a higher return on investment.
White hating; ‘White hating’ refers to deliberately breaking things (in the coding sense). Traditional corporations and startups alike pay good money for skilled software engineers to break their systems. Code security / bug proofing (see Penetration testing or Test Engineering) can be very lucrative for example. These positions pay well both for their emphasis on technical engineering as well as social engineering skillsets. (hint: most security breaches occur due to inside jobs / social engineering).
Odd jobs; Learn any type of marketable skill and take on a side-hustle. This could include a personal pet passion or hobby such as cars, artwork, or any other type of marketable good. You could purchase goods on a secondary market, enact certain repairs / improvements, & then re-market the item on a higher visibility market and pocket the spread.
Get into debt; If you have solid credit and a track record of responsibility (reserves also help), it might make sense to leverage cheap debt. Lower interest debt with favorable terms is a means of instant liquidity, in essence, you are ‘ pulling your future forward ‘ via credit worthiness. This only makes sense if you have a reliable way to make a return on this debt HIGHER than the interest rate assumed. Many investors have repeated this method to make generational wealth in real estate (which typically has fixed-rate debt with favorable, long terms); this could be an option for more enterprising investments with higher perceived risk tolerance.
One might find student loans or other types of secured, very low interest debt an interesting option to leverage to make multiples on. Not for the faint of heart.
Inside of crypto, this may include :
Actually approaching teams that are hiring - many are currently; As crypto continues its adoptive growth trend, all types of skillsets are needed and in demand. These can include things such as simple community building / curation, programming, architecting, marketing and business development.
One easy method to advance in crypto without prior relevant on-the-job experience is to take a telegram gig - you can reach out directly to a team and request to become an admin or moderator, they may ask you for your resume or CV, and then if you prove yourself to be a reliable and valuable member of the community, there could be room to growth with the team if you are willing to further demonstrate your worth to them via other means (actual system development & rollout, networking with other teams for potential partnerships, white-hating, etc.).
Bug bounties for new and emerging projects; as well as larger complex protocols.
Learn solidity (a programming language / api in crypto) & help various projects with their coding / implementations for free; could lead to more lucrative paid roles with more permanence.
For more entrepreneurial-focused individuals with marketable ideas & products, there are also various methods of acquiring seed-based start up capital from familiar sources, and both angel & VC investors alike :
Friend and family members; Most times, for sub ~$100k start up capital it is considered the ‘ friend and family member round ‘. Do you have any friends that would fund you ? Business associates / colleagues ? How about family members that believe in you or would be willing to fund your idea? After getting a little start up capital secured, next would be marketing / growing past the early idea phase into alpha / beta, showing a working product & pitching it to early stage angels / vc for series A (then B / C), or in crypto speak, maybe creating a token / model, & then creating an auction or however you want to kick start.
Biggest questions to consider when pitching an idea include : How will this idea / project / plan / etc generate an ROI? ; Investors in an idea (& people) will also be asking How can I have a piece? (revenue share). Remember, the VC will be investing in people first, then the idea. Ideas are a dime a dozen, the successful ones are due to the people behind them. Right place & time also helps.
There are multiple ways to go about securing funding for your startup or idea, a quick google search can even help connect entrepreneur to investor / idea.
If all else fails, you can always get a small private / personal loan too, this is how many folks first get off the ground prior to moving on to more exotic means of funding later (make sure your business model if sound before pursuing debt - your risk profile must be minimal, and your profit margin significantly large in order to make funding your idea a profitable proposition for all parties involved).
( 2. ) Tax Optimization, Minimization
Depending on your country, location / nationality, there are various ways and methodologies available to optimize tax obligations (aka hack your tax).
For U.S. citizens whom wish to keep their citizenry, Puerto Rico Act 60 could be an attractive way to bring tax obligation to 0% (fees involved). This requires quite a bit of legwork, and may only make sense for investors whom already have quite a bit of net worth built up already.
If you don’t wish to remain tied to a U.S. system ridden of debt and turbulent politics, full renunciation of citizenship is also an option, but much more permanent.
Finding a qualified CPA or accounting / tax or agency focused firm specialized in tax deductions related to crypto or other advanced investment strategies could also pay dividends.
Other options include tax-deferred real estate investment properties, Portugal for those outside the U.S. net, and a myriad of smaller jurisdictions and countries (think name-brand wise) who must compete for your talents, capital and skillsets. See visa programs & sponsorship / citizenship by investment
( 3. ) Short-term Assets & Long-Term Core Holds
Now that we have our initial capital reserves / income streams built up and we have minimized for tax (i.e theft of our assets), we can approach the idea of assets in order to significantly grow & multiple our wealth. The first thing we should be organizing in our minds here are the issues of : a. What is a short-term hold & b. What is a long-term hold.
Short-term Assets (interchangeable with ‘trades’)
These are our easily disposed of ideas, they could feed into long-term core holds (either by supplying that basket with the requisite funds needed to acquire) or they could evolve into longer term holds - this will depend on the individual and their unique goals / ideas.
Examples of short-term trades could include high beta, interim risky alt coins, un-tested or unproven teams, or more high-risk sectors (see meme stocks).
Long-term Assets (Core holds)
As far as crypto is concerned, it doesn’t get more ‘ standard ‘ than a portfolio consisting of BTC & ETH.
Outside of the crypto-realm, even for those in crypto, there are many benefits to holding assets in physical (ie non-digital) form.
Gold & Silver are typical standby options; for those of the crypto breed who think BTC may be ‘ replacing ‘ the yellow metal (gold 2.0), other assets may be found to be just as if not more attractive. Think of the character traits that make BTC attractive : Scarcity, inability to duplicate / replicate / dilute etc. Get creative.
A note on risk …
Although not a direct ‘ consideration ‘ per-se, the notion of risk in any portfolio construction or formulation is critically important. It goes without saying that more risk-centered (high beta, low cap alt coins or memestocks) should be utilized, but with smaller bet sizes and higher risk tolerances. These plays have higher capacities for gains and return (asymmetry), but should not make up the bulk of your core. As many a legendary investor of note has remarked, ‘ it’s better to be wrong 99 times and live to see the day your 100th chance bears fruit ‘.
( 4. ) Strategic Investments
Upon accounting for our initial capital reserves, formulating strategies for tax minimization, and our core reserves in place ($BTC, $ETH, Gold/Silver, etc.), it also becomes important to consider how our individual short and long term focused investment theses fit into an overall portfolio strategy context.
Strategic investments can include things such as high FA altcoins (think altcoins with steady liquidity and long-term backing from notable VCs, well-known in the community - bonus points for DAOs that are well-funded, diversified and able to withstand very large market crises);
They can also include hedged-bets; things that may work out, but might not - but work to round out our risk in an event that we are wrong. For example, if you think the end of the world is indeed near (strict crisis investing), what is your plan b if you are wrong? Always have a hedge.
Interesting undervalued, (albeit more speculative) plays may also be considered in the realm of productive NFTs, those whom also contain intrinsic or inherent utility (some may produce airdrops, passive cash flow, or be required for certain rights & privileges). I currently like to focus on NFTs in the metaverse/ play-and-earn space, as I feel its current size vs the traditional gaming market (non-tokenized/monetized) lends itself to large growth potential.
( 5. ) Staking Rewards & Liquidity provisioning
Many currently familiar with crypto (or least with a passing knowledge) are familiar with the idea of staking rewards. Similar to a dividend in the stock market realm, staking rewards are given in turn for a commitment to a network. This can be in various forms (by holding a token, by participating in governance, or other means).
Going a step further, one can also provide a 1:1 ratio of asset, in essence providing ‘LP’. Typically the asset is paired with what is known to be a more stable or universal crypto or representation or value (via stable coin), and then ‘ committed ‘ to liquidity. This benefits any project that desires a high level of liquidity or market tradability. In return, the project grants you a certain network ‘ share ‘ or the rewards, in either the native token or some other representation of value.
Participating in projects and ecosystems to net their staking rewards could be hit & miss - it becomes very critical to pay attention to the underlying FA of the project as well as active management on part of the investor. Questions that should be asked and addressed include:
Where do the rewards come from?
How does the team / project intend to address inflation / dilution of the coin via new supply from staking / LP?
Are there measures in place to incentivize continued participation & value accrual of the native token?
( 6. ) Personal Network
Growing our personal network is often forgot about as far as its importance in wealth accumulation strategies. Especially important when considering how to make our own portfolios hardened beyond simple resiliency - it is contrarily also one of the last things we expect to hear when researching myriad stories of success : who did they know?, how did they network?, what social circles did they surround themselves with, and what company did they keep?
These are key questions to remember when building your investment strategy, due to their direct impact on information share. There is a saying that goes : The more eyes and ears you have, the greater your financial redundancy, the greater your edge; Knowledge is wealth, knowledge is power.
Strategies to enhance and improve your network:
Join discord, telegram and other special interest groups; be active, continue learning & never stop
Share for free, attracting altruism with altruism
Focus on subjects you are genuinely interested / passionate about - this will come through in your work
Attend local meetups and conferences focused on your passions
Strike conversions with people you view as smart, but different than yourself. This way, you both develop a fluid intelligence that allows you to see other viewpoints and challenge your preconceived notions, while at the same time keeping a friend-group with varied skillsets than your own.
( 7. ) Asset Diversification
Fiat vs Stocks vs BTC vs ALTs vs NFTs vs Fiat Currency vs Precious Metals vs Bonds …
Somewhat similar to our discussion on short-term and long-term assets - it is important to consider diversity in your overall wealth building strategy. Going back to the core tenant of antifragility - a portfolio diverse in uncorrelated assets lends itself to benefiting from chaos & fragility, instead of being negativity impacted by it.
A well-rounded portfolio considers all variables and scenarios, and is able and agile enough to take advantage of them. As crypto-folk, we may not like fiat currencies, but during global panics and crises, often than not they are the best performers by simply holding their relative value vs. the liquidity-drain. Having currency reserves on hand at all times is certainly a prudent step towards building an antifragile portfolio.
A model portfolio could include :
BTC / ETH core
Strategic Investments & Alternative Investments - To include high FA alts, strong NFTs with productivity and utility (as discussed prior). Caution should be exercised in regards stocks with high pe multiples (i.e current equity environment)
% of Physical precious metals - to cover for the unexpected & also wealth multiplication; study past periods of increasing fragility (silent depression, great depression, world wars, etc) to see how they performed. Study the gold/silver ratio.
% of Native fiat currency (USD, YUAN, etc) - to cover for the unexpected; both in & out of banking system.
( 8. ) Intangible Diversification
Our considerations thus far have mainly focused on capital requisites (income & reserves) and portfolio diversity, resiliency & redundancy; we now move on to things that will not only help us weather any financial panic or crises directly, but also assist us indirectly. We can also gain from disorder, panic & crises via boosting our well-being in the individual sense, network, as well as spiritual.
Our success financially is inexorably tied to our physical, emotion as well as mental state. If your brain is the bedspring of your performance in a cognitive sense, your body is the bedrock in which it sits - and your performance in any & all endeavors you face in life (be it portfolio curation, adversity tolerance or otherwise) is a direct causal measure of how well you respect your whole.
Lifelong Education & Challenge …
These measures can include traditional education through standard channels, as well as higher & advanced education, as well as life-long learning through self-taught methods. Interesting platforms for furthering individual education include :
Complete free Coursera / Khan academy courses
Read books on diverse subjects and topics
Complete non-traditional, Computer-based training (video, audio, etc)
Performing new & ‘ uncomfortable ‘ activities - step outside your comfort zone
Complete a survey course or pursue a higher education in a field of interest
Expose yourself to constant adversity - i.e Challenge yourself
If you enjoy reading for example, try your hand at writing articles at length by starting a substack or medium on a topic you’re passionate about.
If you tend towards writing / content creation, try pushing yourself to sit and listen / read others work. If you can combine both skillsets (think input - process = output) you will become more adept at iterative thought, & not only use found / consumed knowledge to regurgitate, but also synthesize & innovate new ideas.
Meditate …
Every time you meditate, you are performing neurosurgery on your brain.
Meditation is akin to invasively reconstructing your conscious experience into something / someone more focused, attentive, and less distracted. You are literally loosening connections to the amygdala (stress center of the brain - think fear, fight & flight) and strengthening connections of focus, attention and learning.
In general, meditation (such as a mindfulness mediation routine) should be practiced at a minimum 30 minutes each day in quiet place.
Try to focus either on a ‘ standard candle (i.e single thought) - bringing your focus back to that thought as soon as the mind starts to wander; or the opposite, try to focus on nothing at all, and as soon as a thought enters active consciousness, acknowledge the thought and then disregard it - eventually, you enter a state of less ‘ noise ‘, this is the goal of a clear mind, one which slows down, not distracted by low-value thought, yet is efficient and clear, ready to tackle your goals.
Contrary to popular thought, meditation is a workout for the brain, it is akin to active exercise for the muscles and should be practiced regularly to maintain clarity.
Physical …
Assisting in both the cleansing processes of your brain, enhancing cerebral blood flow (think new ideas / inspiration), as well as lengthening & improving your overall quality of life beyond just your investment portfolio - remaining physical is critical.
Join a gym / club & make it a routine - it has been proven time and again that movement & activity in general increases blood flow to the prefrontal cortex, which enhances cognition, memory & sense of calm and wellness (i.e clearer thought).
Start simple and build out as you go. The biggest roadblock many often face in venturing into any new routine is building too much complexity from the start.
If your routine is cumbersome, hard to follow, & seems burdensome / overwhelming, there is a good chance you won’t maintain it; Trick yourself first with simplicity, then, once the habit is developed, build on it with more advanced techniques and routines.
Diet …
Equally important as what you do for your being physically / mentally, diet or nourishment for your body may be just as much if not more a determinant factor in your overall consciousness and health. There are many approaches to a ‘ healthy ‘ diet, and these strategies are often fraught with radicalism, idealism, as well as debate. One thing can be sure - the body enjoys periods of acute, healthy stresses (called hormetic stress). Hormetic stressors are anything that - you guessed it - challenge the body, make it uncomfortable or make it adjust. Healthy stressors in the diet can include :
Intermittent fasting
Ketogenic dieting
Simply trying new, diverse foods
The key here is not to overdo it, the body -needs- change, but doesn’t necessarily always want it chronically. Listen to yourself - if you feel better when on a cyclic ketogenic regimen sporadically, do it. If you feel better only eating meat and proteins from healthy sources for a week here or there, do it. If going vegetarian is your thing, do it (just make sure to take care to supplement whole food sourced fat soluble vitamins).
( 9. ) Tacit Knowledge
Tacit knowledge or implicit knowledge (as opposed to formal, codified or explicit knowledge), is knowledge that is difficult to express or extract, and thus more difficult to transfer to others by means of writing it down or verbalizing it. This can include personal wisdom, experience, insight, and intuition.
Ever been around an actual genius? How about a prodigy? If you have, you quickly realize a simple truth about life - some people seem to simply have an innate sense of smarts. In essence - some folks have it, some don’t. However, even for the most ‘ un-gifted ‘ among us, there are ways in which we can improve our own benchmarks of cognitive intuition.
Spend time around genius in order to become genius. Multiple studies have shown that your environment is critical to shaping the person you ultimately become (further, it’s never too late to adjust, our brains remain plastic well-into adulthood).
The 3 - 4 closest people you surround yourself with have the biggest impact on your habits, so it makes sense to incorporate strategies that both exclude negative traits, and actively pursue and surround yourself with positive and desirable traits.
Negative influences around you can also go beyond individuals - to include what type of media you consume. Want to learn more about a particular subject or fill your brain with motivation - why not try curating your playlist to only those subjects, and lessen your exposure to things that may impede or set you back.
As mentioned above in ‘ Intangibles ‘ - developing & sticking to a healthy diet, meditation & work out regimen goes miles towards developing your wholistic and innate self as well.
( 10. ) Law of Karma
What is the law of karma?
According to The Law of Karma and the Principle of Causation by Bruce R. Reichenbach,
The law of karma functions as a central motif in Hindu, Jaina, and Buddhist. thought. Simply formulated, it states that all actions have consequences which, will affect the doer of the action at some future time.
It’s easy to look at karma as ‘ voodoo ‘ , pseudoscience, neither here-nor-there. True, karma is difficult to pin down, there is no direct action / reaction. No direct cause and effect, investment or return. However, we can reap rewards from practicing a life filled with karma, indirectly.
Karma doesn't change our universe as much as it changes how we interpret and experience life. And how we experience life determines our happiness and peace of mind. Being present vs absent can also help us notice times in which karma may have benefitted us in the past, one must first be open to the idea of karma before leveraging it in an antifragility sense.
Karma in the scientific, psychological world context …
According to Josh Korda’s insightful post of the Psychology of Karma ,
Karma becomes more intelligible (easy to understand) once we understand how positive mind states - such as pride, confidence and inner esteem, affect and arise from actions that connect us with others.
This is in contrast to pervasive negative mindstates (such as shaming, guilt, remorse and loneliness) which arise from actions that place us in direct competition with others.
When we actively try to focus on positive frames of mind, disregarding the negative, we arrive at a connected (law of attraction), well-centered life, ready to not only tackle, but also thrive in the face of volatility.
Simple examples of karma …
Practicing giving vs. receiving
Helping others vs extorting
Giving back vs taking
Although you may not see a direct quantifiable benefit immediately, there is no denying the ROI on living a life through the lens of altruism, karma and positivity.
♐ Key takeaways …
The global financial system continues to increase in complexity & instability; introducing elements that foster antifragility in our every day lives (via diversity, challenge, intellectual capital, personal & spiritual growth, and network) becomes an efficient way to equalize this fragility.
Now more than ever it remains critical to map avenues towards improving individual capital (monetary, knowledge, physical and otherwise) - to not only survive current fragile fiscal landscapes, but benefit from them.
Crypto continues to remain at a frontier of innovation, creative destruction & growth - thus it becomes paramount to remain focused on various avenues of untapped growth, such as play/earn, metaverse, defi, & others.
Direct cause & effect / Investment & return / Cost & benefit are typical means of analyzing allocations of time and attention at the individual level, but are not always the best overall return on investment in a world marked by chaos theory.
Considerations for growth in the individual sense vs strictly capital can yield returns are greater than monetary alone.
Indirect investments in self and well-being can sometimes have a holistic impact, benefiting various measures of wealth beyond simple metrics of portfolio.