Month: August 2016

80/20 Examined on All Aspects of Life

By Everlong, Bkpsusmitaa [CC BY-SA 3.0 (], via Wikimedia Commons

I talked about the need to enjoy the pleasures of life 20% of the time, so I wanted to thoroughly examine my life to ensure that for activities that mainly only brings pleasure, I can leave reasonable buffer for it.

Let’s start off with health.

For sleep, I will still aim for 8 hours of actual sleep (~9 hours of sleep time), since having enough sleep is the most crucial factor to physical and emotional healthiness. This one I can’t compromise with 20% of pleasure.

For food, I eat 21 meals a week, so my tolerance for bad food is 4 meals. Bad food is essentially anything that’s really processed.

For exercise, I aim to eventually be able to do 24 minutes of HIIT for 6 days a week. I see no need to compromise with 20% of pleasure since I love calisthenics and I really need to reduce my blood cholesterol. The reason for 144 minutes of HIIT a week is because the American Heart Association recommends at least 75 minutes of vigorous exercise / week, and the HIIT exercises I do are in 12 minute segments, so doing double the recommended minimum should help me optimize my physical fitness without eating into the time for other activities.

For solo time (as I’m an introvert), I will aim to have at least 20% of my waking hours reserved for solo time. That means for 105 hours a week, 21+ hours is spent alone to do whatever I want.

Let’s move onto relationships.

I will focus 80% of my socializing time on 20% of my friends, even after cutting our a significant portion of them from my life. That means of the 307 Facebook friends I currently have, I will focus on the 61 friends most of the time. As for the criteria of who would be the 20% I spend most of my energy on, it would be basically people who possess qualities I respect and admire, namely reasonable, open-minded, good tempered and graceful.

Regarding how much time I should spend on my friends, it would be the same for solo time, which is at least 20% of my waking hours. So for the 21+ hours I spend every week on relationships, 16.8+ hours is spent on my top 20% friends.

Next stop is financials.

For my budgeting, I will tolerate 20% of my budget for pleasure (thus I allow 25% expansion of budget on top of bare minimum expenses).

For positive budgeting surprises, I allow 20% of the positive surprise to go to my Regret Averse fund.

For investing, similar to time spent on solo time and friendships, I will spend at least 20% of waking hours to investing, with 80% of that time spent on researching on great companies worth buying and holding while 20% of that time is spent researching on companies that have decent moats at significant discounts to fair value.

Last stop is career.

I don’t think I have much of a choice but to yield at least 63 hours every week to work.

The only addition to my work would be to study at least 50XP every day on Duolingo for German.


Reflecting on “On Old Age” by Cicero

By Woodcut by unknown artist; book printed by Hieronymus Scotus; page scanned by Aristeas (Roman Eisele) from his own copy of the page. [Public domain], via Wikimedia Commons

As today’s my 24th birthday, I thought it appropriate to fast forward to my death bed to reflect on “On Old Age” by Cicero to provide insights on how I should conduct my life 24 years old onwards so that I can say I lived a good life.

First off, I should focus on improving my character everyday to be reasonable, open-minded, good tempered, and be graceful“For old men who are reasonable and neither cross-grained nor churlish find old age tolerable enough: whereas unreason and churlishness cause uneasiness at every time of life.”

Secondly, I need to focus on living a life of virtue, since “the arms best adapted to old age are culture and the active exercise of the virtues. For if they have been maintained at every period—if one has lived much as well as long—the harvest they produce is wonderful, not only because they never fail us even in our last days (though that in itself is supremely important), but also because the consciousness of a well-spent life and the recollection of many virtuous actions are exceedingly delightful.”

Since what constitutes a moral life is subjective depending on which school of thought, I’d like to define mine. For me, a life mixed between libertarian, Rawlsianism and utilitarian would be the ideal that I strive for. I strongly believe that everyone should be able to decide what they want to do with their body in life (libertarian), but in order for that to work, everyone needs to be economically sufficient enough to make choices out of free will rather than out of necessity, so for those who’ve won the ovarian lottery and thus possess aptitudes that are highly valued by society at this moment of time, these people need to give back to society whether through government tax or self-enforced tax (Rawlsianism and utilitarian). In the event that society faces upheaval that requires tough decisions in order to survive, personal liberties should be scarified if deemed as a temporary measure, but if the day comes that survival is impossible or extremely improbable, than personal liberties should be restored until the end of life.

The implications for me to living a life of virtue is thus this:

  • In everything that involves other people’s services, I must ensure to the best of my ability that the person is complying to service by self will rather than forced will.
  • Costs must be justified by benefits. When society or lives are not under serious threat, my stance is firmly on the side of people being able to do whatever they want with their bodies. If the ideal of personal liberties threatens existence, then no action or words should be enacted if the less than ideal existence is still pleasant and bearable in general.
  • I will try to be as tax efficient as possible (eg. Focus on capital gains rather than dividends to minimize tax impact of 30% dividend withholding tax), but not exploit loopholes to avoid paying taxes (eg. Not reporting income or setting up overseas entities for tax purposes). I will happily and promptly pay my taxes.
  • I will further self-tax my post-tax income based on Peter Singer’s The Life You Can Save calculator to ensure economic sufficiency can be effectively tackled in areas that aren’t reachable by government initiatives.
  • When investing, when it comes to long term holdings, I will only buy and hold stocks of companies that are good corporate citizens (tries their best to be fair to all stakeholders) and provide products / services that societies can’t live without. This ensures companies whose existence benefits society is rewarded accordingly by stock prices that are less likely to go down because I’m unwilling to sell.
  • Even though I will punch above my weight when it comes to giving back to society, my life is still my life, so I don’t owe it to society that every decision I make would optimize maximum compounded financial returns for society. As long as I fulfill above-weight class contributions, I can do whatever I want with my money as long as it doesn’t infringe on libertarian values (eg. purposefully buying products / services that further the agenda of slavery).

Thirdly, I will keep improving myself so that I can be of value to society. “The great affairs of life are not performed by physical strength, or activity, or nimbleness of body, but by deliberation, character, expression of opinion”, “Old men retain their intellects well enough, if only they keep their minds active and fully employed. Nor is that the case only with men of high position and great office: it applies equally to private life and peaceful pursuits” and “But this is enough to show you how, so far from being listless and sluggish, old age is even a busy time, always doing and attempting something, of course of the same nature as each man’s taste had been in the previous part of his life.”

Fourthly, I will do things that my body permits me to do at different seasons of life if I really want to do it and it doesn’t infringe on libertarian principles, and make sure I exercise regularly (eg. HIIT) to improve my chances of still being physically active into old age. “You should use what you have, and whatever you may chance to be doing, do it with all your might”, “For what is more charming than old age surrounded by the enthusiasm of youth? Shall we not allow old age even the strength to teach the young, to train and equip them for all the duties of life? And what can be a nobler employment?”, “The course of life is fixed, and nature admits of its being run but in one way, and only once; and to each part of our life there is something specially seasonable; so that the feebleness of children, as well as the high spirit of youth, the soberness of maturer years, and the ripe wisdom of old age—all have a certain natural advantage which should be secured in its proper season”, “Active exercise, therefore, and temperance can preserve some part of one’s former strength even in old age.”

Fifthly, I will enjoy the pleasures of life in moderation using the 80/20 principle, where I will only indulge in the pleasures of life 20% of the time to yield 80% of the fun. “No ore deadly curse than sensual pleasure has been inflicted on mankind by nature, to gratify which our wanton appetites are roused beyond all prudence or restraint… For when appetite is our master, there is no place for self-control; nor where pleasure reigns supreme can virtue hold its ground”, ” For pleasure hinders thought, is a foe to reason, and, so to speak, blinds the eyes of the mind. It is, moreover, entirely alien to virtue”, ” Nor was I, in fact, ever wont to measure my enjoyment even of these banquets by the physical pleasures they gave more than by the gathering and conversation of friends”, “What pleasures are there is feasts, games, or mistresses comparable to pleasures such as these? And they are all tastes, too, connected with learning, which in men of sense and good education grow with their growth.”

Sixthly, I shall live everyday of my life reminding myself of my mortality so that there’s urgency to live life to its fullest, but to not be afraid of death when the day comes. “Death, that is either to be totally disregarded, if it entirely extinguishes the soul, or is even to be desired, if it brings him where he is to exist forever. A third alternative, at any rate, cannot possibly be discovered. Why then should I be afraid if I am destined either not to be miserable after death or even to be happy? After all, who is such a fool as to feel certain—however young he may be—that he will be alive in the evening? Nay, that time of life has many more chances of death than ours”, “Now the harvest of old age is, as I have often said, the memory and rich store of blessings laid up in earlier life. Again, all things that accord with nature are to be counted as good. But what can be more in accordance with Nature than for old men to die?”

Investment Thesis – US Bancorp

Warren Buffett / Charlie Munger’s Four Filters + Risk Factors

  1. Understand the Business
  2. Enduring Competitive Advantages
  3. Able and Trustworthy Managers
  4. Risk Factors
  5. Bargain Price = Margin of Safety (I will not explore this as everyone should devise their own fair value)

1. Understand the Business

US Bancorp engages in 4 businesses:

2. Enduring Competitive Advantages

US Bancorp’s Competitive Advantages stem from the following sources:

  • Low Cost Efficiency Ratio
  • High Asset Quality
  • Well-Capitalized
  • Low Derivative Exposure

Low Cost Efficiency Ratio, High Asset Quality and Well-Capitalized constitutes a positive reinforcing cycle:

US Bancorp Business Model.png

By being cost efficient, US Bancorp is able to be well-capitalized (retaining liquid capital that isn’t lent out) whilst being profitable. This ensures US Bancorp can play in the game of lending to companies with great credit rating and only engage when the interest rates are good since US Bancorp would still be profitable even at the extremely low interest rates that US Bancorp can charge to these companies whilst US Bancorp can afford to not make loans if it doesn’t make business sense.

By statistics, companies with great credit rating default much less than those without, which thus builds resilience to profitability as US Bancorp is expected to keep raking in the net interest income regardless of economic cycle.

This then further drives / maintains the low cost efficiency ratio since as long as expenses don’t increase faster than growth of profits, the resilience in profitability allows for the profit side of profit / expense to drive / maintain the cost efficiency ratio down.

I further deem having a low derivative exposure to be another key competitive advantage. The reason is simple, it’s extremely hard to decipher the real value of derivatives on a balance sheet, so the more derivative exposure a bank has, the higher the catastrophe risk. Whilst competitors are potentially blowing up left and right, US Bancorp’s low derivative exposure allows it to stay profitable throughout economic cycles.

And when you look at the derivative exposure of the Top 5 US Banks in Asset Size, you’ll understand what I mean by US Bancorp having a low derivative exposure:

Rank – Bank – Asset Size – Derivative Exposure $ – Derivative Exposure X

1 – JPMorgan Chase – 2.42 trillion48.76 trillion – 20.1x

2 – Bank of America – 2.15 trillion40.20 trillion – 18.7x

3 – Citigroup – 1.77 trillion53.47 trillion – 30.2x

4 – Wells Fargo – 1.75 trillion5.83 trillion – 3.3x

5 – US Bancorp – 0.42 trillion0.18 trillion0.4x (!!!)

3. Able and Trustworthy Management

Ever since former CEO John F. Grundhofer brought Wells Fargo’s playbook of simple banking, disciplined loan underwriting, and low cost efficiency over to US Bancorp in 1990, he and his successor Richard Davis has been diligently focusing on 5 priorities only:

And the results demonstrate management’s ability, since US Bancorp is now the best US bank in terms of ROA, ROE, Cost Efficiency Ratio, and 2nd place in terms of Charge-Off Ratio.

US Bancorp’s track record also demonstrates management’s trustworthiness of focusing on its 5 priorities over the 20+ years as US Bancorp has stuck to growing 4 pretty much the same core businesses, driven down cost efficiency ratio to be the best, never exceeded 2.4% net-charge offs even during 2008=2009 financial crisis, improved credit rating to be the best, and kept all of the aforementioned metrics on target whilst acquiring many institutions.

4. Risk Factors

I find US Bancorp to be extremely low risk if risk is defined as destroying shareholder value.

There are however 2 ways I can see US Bancorp destroying shareholder value.

One way is if US Bancorp starts destroying shareholder value is if it abandons its current 5 priorities. As long as it suddenly decides to change direction in just one of the 5 priorities (eg. aggressively grow investment banking business or being less disciplined in cost control, asset quality, being well-capitalized and acquisitions), then the positive reinforcing cycle mentioned above will fall apart. The scary part of this is that any change in culture will be hard to observe, so being tipped off by a delay in deterioration of metrics could already be too late as there’s going to be a delay between cause and effect.

Another way is pure bad luck. US Bancorp for all its conservatism could still be ruined by large scale debt defaults since it is currently 9.8x leveraged [1]. This is always an inherent risk that comes with the banking business.

As a result of these two key risks, I would at most allocate a 1/3 position size to US Bancorp based on Charlie Munger’s diversification rule of “In the United States, a person or institution with almost all wealth invested, long term, in just three fine domestic corporations is securely rich“.


[1] Reference –

14.3% ROE and 1.46% ROA implies 9.8x leverage as only through that leverage is US Bancorp able to juice up returns from 1.46% to 14.3%.


Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)