Immigrant Inc; Making the Boring Choice #113

Reflecting on a few interesting reads and listens over the past week

Immigrant Inc 

This was a fascinating read into the business model behind recruiting international students in Canada. It describes their journey from poor villages with limited opportunities in countries such as India, rural China, and several parts of Africa. They are essentially sold the dream of becoming a permanent resident in Canada by enrolling in a post-secondary college/university. The entire process is facilitated by agents who are paid on commission by Canadian universities and colleges. To give you a sense of how big this business model has become – the article explains that international students are responsible for almost 40 percent of all tuition fees across Canada. I suspect that number is a lot higher as you begin to remove Tier 1 universities/colleges that attract most of the local students.

The article dives into many of the challenges that these international students face. To start, these students often take on significant amounts of debt (e.g. borrowing against their family’s property) to pay for the tuition in Canada and work full-time jobs to pay for necessities while studying in Canada. Most of these international students are often exploited – working for jobs that are below minimum wage with no resemblance of workers’ rights due to their temporary visa status. The affordability of housing also forces them to get creative and pay for illegal rooming houses that take on 10-15 people (often more) in a single-detached home. The pressures of trying to graduate from school, get paid, and send money back home have led to a myriad of mental health problems amongst international students – sadly resulting in an increase in drug abuse and suicide cases.

In my opinion, the influx of international students goes beyond propping up a number of post-secondary institutions across Canada. These students are also a huge driver for Canadian immigration as a whole. If you take a look at real estate surrounding colleges and universities, they all tend to be propped up by international students. Once these students graduate, they become a key addition to the Canadian workforce – particularly minimum wage jobs.

The current/pending labor shortage in North America only increases the pressure to improve immigration – growing the need (and therefore incentive) for the system described above. Platforms (like ApplyBoard – which just raised $375M at a $3.2B valuation) will continue to emerge and intensify this process as well. Whether it’s the government, post-secondary institutions, or individual agents, the incentives are all aligned to exploit the hopes and dreams of immigrant students (and families) looking to build a better life.

Making the Boring Choice

I want to build off of a post by Joshua Brown – where he describes a new form of Fear and Greed pushing society today.

“The Fear I see these days is a fear of becoming a relic of the past. A fear of seeing your peers catapult themselves ahead of you. A fear of missing out, which has been well documented and has become the spirit of the times we live in…I would label this type of fear Insecurity. The fear of being left behind and looking like a fool.

Even the people winning – that’s not enough for them. The money is beside the point. They also need others to feel the pain of not having been right. I told you so, should’ve listened to me. The public victory laps and displays of haughtiness seem almost purposely staged to provoke hostile reactions from the crowd.” Joshua points out the overwhelming sense of Envy seen amongst people.

The combination of insecurity and envy along with the heightened sense of visibility we have into each others’ lives has pushed many of us to become an investor with the perceived need to constantly take significant risks, follow the crowd and outperform people around us.

As we zoom out and look at society as a whole, we’ve created an atmosphere that is similar to a massive multiplayer video game. We’ve also built an unhealthy fascination around the exciting plays – where one can and should earn 100%+ returns in a few days. We see this all the time on social media (Twitter, TikTok, Instagram, Reddit).

The idea of staying disciplined and making the more obvious plays that could yield a stable return profile (even if it’s effortless) feels ludicrous. It’s like going to a party and trying to read a book.

In my opinion, this has actually created an opportunity in making boring choices like investing in companies with a strong history of high ROICs and moderate growth (vs. chasing speculative stocks) or building a portfolio of single-family home rentals (vs. flipping houses). While it may require a certain level of patience, the effort to return ratio is far better. You’re also far more likely to improve quality of life – which is presumably the initial reason why people entered this frenzy in the first place.

A Culture of Writing; Second-Order Thinking; Code 2021 #112

Reflecting on a few interesting reads and listens over the past week

Building a Culture of Writing 

Some of the greatest companies today tend to have a culture of writing embedded into them including: 

This post goes into the value that can be gained by building a culture of writing throughout the organization. It can be used as either a papertrail that allows people to understand why decisions were made or a curation system where people are able to build a shared knowledge base. 

Here are a couple of parts that can be helpful for most of us - regardless of the line of work we're in. I'll be looking to implement these three tactics within my day-to-day work to help push a better writing culture internally. 

Meeting Agendas

  • Do everyone a favor and require these for meetings. If you’re running the meeting, but sure you have one. If you’re asked to attend a meeting without one, ask for it! 

  • Sending a meeting agenda signals to your colleagues that you value their team and helps them better prepare.

  • If shared context is required, try a drafting memo and starting the meeting off with a silent reading period.

  • Template: Start the meeting by stating “we should not leave this room without x” Before the meeting ends, check back against your meeting goal


  • If you get the same question 3 times, it’s probably time to document the answer somewhere. That way, your colleagues can self-serve on finding the information they need to do their work. It saves everyone time!


  • Companies often have a formal process for doing this. Whether it does or does not, I’m a big fan of the personal reflection as a tool for growth.

  • Consider sharing this with those you work with closely, especially if there are ways they can help you.

  • Anecdote: David Singleton’s Founders Journal has a section for tracking your satisfaction on a given week according to how you rate your week on the following dimensions. For me, it’s a great mechanism for keeping me honest on how I’m actually doing over time. 

    • 1- enjoyed it

    • 2- got stuff done

    • 3- progressed goals

    • 4- learned

  • Template: I like to do these in three sections. 

    • 1- where I believe my particular working style and skills are contributing to my success or holding me back

    • 2- where believe the infrastructure at the company is contributing to my success or holding me back

    • 3- asks for how those around you can help you grow and stay accountable

Second-Order Thinking 

The vast majority of content and applications are designed to encourage first-order thinking - where there is an action and consequent reaction. Combined with the idea of building a culture of writing, it is important to build the habit of second-order thinking. 

This post shares a few steps on how to improve your second-order thinking. 

  1. Always ask yourself “And then what?”

  2. Think through time — What do the consequences look like in 10 minutes? 10 months? 10 Years? 1

  3. Identify your decision and think through and write down the consequences. If you review these regularly you’ll be able to help calibrate your thinking.

  4. (Bonus) If you’re using this to think about business decisions, ask yourself how important parts of the ecosystem are likely to respond. How will employees deal with this? What will my competitors likely do? What about my suppliers? What about the regulators? Often the answer will be little to no impact, but you want to understand the immediate and second-order consequences before you make the decision.

I personally believe the act of taking the time to brainstorm and writing down consequences vs. riffing in your head is a lot more powerful as it can allow you to revisit your thoughts later and often improve your thinking in the long-term. 

A bit more on second-order thinking here from this talk by Howard Marks. 

and another one - where Ray Dalio applies this idea to describe what's going on in the world (from an investing perspective). 

Code 2021 

If you're short on podcasts to listen/watch - I'd check out some of the talks from Code 2021 below. 


The Mundanity of Excellence #111

Reflecting on a few interesting reads and listens over the past week

I'd like to keep this week's post short and focus on a fairly impactful read. This is a great article by Dan Chambliss that I found on Twitter (h/t Patrick O'Shaughnessy). It really captures a point that many (including myself) overlook in the pursuit of excellence (not to be mistaken with moments of success). This article into the idea of excellence by exploring the world of swimming and what differentiates Olympic vs. 'normal' swimmers. 

Here’s a summary along with a few of my thoughts/reflections.

Excellence Requires Qualitative Differentiation 

Quantitative improvement entails an increase in the number of some one thing one does. A qualitative change involves modifying what is actually being done, not simply doing more of it. 

This often requires having the right combination of technique (how you're actually doing X), discipline (the consistency in which you do X) and attitude (how you feel about doing X).

In reality, this feels rather counterintuitive and quite challenging to explain to others. The logical (and perhaps easier) way to improve your skills is by taking a more quantitative approach where a certain volume of effort will undoubtedly lead to better results. 

Qualitative differentiation forces you to take more of a first-principles approach, build a base of knowledge (often through trial and error) and develop your skills over time. The general vagueness of qualitative differentiation (often due to not paying attention to the details) makes this less achievable. 

Excellence is Mundane

"Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole. There is nothing extraordinary or superhuman in any one of those actions; only the fact that they are done consistently and correctly, and all together, produce excellence."

The post uses swimming as an example. My personal experience in learning to play the piano was quite similar. Excellence can only be achieved by stitching together several small habits together and doing it over and over again - to the point where it feels routine. This is also perhaps the best way to explain my experience at Constellation. There isn't any single act/special idea that makes the organization great at investing but rather a number of smaller habits that lead to several investments made by a large group of people supported by an appropriate level of control and incentives. 

"In the pursuit of excellence, maintaining mundanity is the key psychological challenge. In common parlance, winners don’t choke. Faced with what seems to be a tremendous challenge or a strikingly unusual event, such as the Olympic Games, the better athletes take it as a normal, manageable situation."

The idea of 'maintaining mundanity' is one that I believe comes with experience. This is when it's easy to differentiate those who have relied more on talent vs. spending the time to practice/build their skills. 

While the end product may come off as talent or luck, "there is only the doing of all those little things, each one done correctly, time and again, until excellence in every detail becomes a firmly ingrained habit, an ordinary part of one’s everyday life.”

Reading and writing through this reminded me of the talks that Kobe Byrant would share and so I thought I’d end off with this.

Serial Acquirers; The Milken Way; History's Seductive Beliefs #110

Reflecting on a few interesting reads and listens over the past week

Serial Acquirers 

This is a fantastic post by Canuck Analysts on serial acquirers, what makes them special and the challenges/risks associated with scaling them. 

They correctly point out that - "The biggest roadblock to defying the law of diminishing returns to M&A is that most serial acquirers, particularly platforms and accumulators, do not sufficiently scale the human capital involved in M&A and the structures and processes guiding them – as they get larger."

Scaling and retaining human capital as serial acquirers grow will probably be the biggest challenge to maintaining the growth rate within most serial acquirers. The amount of capital available in the market today creates a number of options for experienced investors to build their own shop vs. being a part of a larger serial acquirer. 

Here's a summary chart that points out key risks/opportunities between roll-ups, platforms, and accumulators. The one other row that I would have added is the investment horizon. Typically, I’ve found that roll-ups are the fastest to realize ‘full potential’ vs. platforms and accumulators (which would take the longest in my opinion). This is likely why roll-ups have become a common amongst PE investments.

The Milken Way

This post by Neckar was a great read into the ways of Michael Milken, who is considered to be one of the key 'founders' of the high-yield bond. 

To give you a sense of what his peak looked like: 

"In 1986, the high yield market had grown to some $125 billion in outstanding value. Milken himself reportedly earned $550 million in salary and bonuses that year."

While the post goes into the details, Milken's flywheel to success looked like this: 

  • He built deep domain expertise and an information edge that made him valuable to every player in the market.

  • By taking inventory he increased liquidity and turned his trading desk into the market’s hub.

  • He spread the gospel and highlighted the attractive risk-reward profile to attract a more diverse roster of investors.

  • He backed entrepreneurs and takeover operators hungry for capital.

The step that seems hardest to replicate (in my opinion) is the first one. Despite the feeling that we have more information than ever before, the opposite is also true where there is just as much misinformation out there. Thus, the idea of having an 'information edge' still relies heavily on human effort and building experience. 

The fascinating part about Milken's process is how he was able to apply the process above (along with the power of his network) to successfully build an ecosystem to help solve prostate cancer. 

If you're looking for some prescriptive steps on how you can apply 'Milken's way' - here are some useful steps below: 

  • Go deep in an area of passion or interest. Do the work: collect and unearth valuable information. Identify the key players. Share what you learned.

  • Increase social liquidity. Introduce the old hands and the young guard. Figure out who would benefit from an introduction. Create a venue for the open exchange of ideas and information, whether that’s an email chain, a slack or discord channel, a happy hour, or mountain retreat

  • Increase capitalization and stake new players. If you find yourself with capital (financial, social, intellectual) or influence with those who allocate capital, use it to back deserving new players who will grow the pie for everyone.

  • Maintain an abundance mindset. Be willing to contribute without expecting anything directly in return. Trust that the success of the entire ecosystem will carry you with it.

An interesting point on the third step re: staking new players: For those who don't feel like they have enough capital to back deserving new players, you can start by staking people with a bit of your time and helping them out whether its providing advice or actually helping them out with some of their work. I've had a number of important relationships grow by just 'staking' my time in people I believe in. 

History's Seductive Beliefs 

I always enjoy posts from Morgan Housel (check out The Psychology of Money if you haven't already). Forecasting often focuses on past events vs. underlying behaviors. Morgan sums up human behavior fairly well with this one line:

"They follow the path of least resistance of people trying to simplify a complex world into a few stories that make sense and make them feel good about themselves." 

Here are a few other (misguided) beliefs that he highlights: 

  1. An illusion that other people’s bad circumstances couldn’t also happen to you.

  2. Imagining an unrealistic world where progress and success don’t demand a fee, and a belief that hassle, nonsense, disagreement and uncertainty are bugs rather than a cost of admission to getting ahead.

  3. An assumption that your view of the world is the view of the world, and a belief that what you’ve seen and experienced are the sights and experiences that explain how the world works. 

  4. An assumption that history is a guide to the future and that things will continue working as they did in the past.

The second point is particularly important as I make career decisions. While there are many career paths available, the 'cost of admission' (known and unknown) and the tradeoff associated with pursuing progress/success in one area vs. another has become increasingly apparent to me. Ultimately, it is up to each of us to determine 'what's worth it.'

Virtual Assistants; Buying the Dip; Compensation at Berkshire; Scaling to $100M #109

Reflecting on a few interesting reads and listens over the past week

Virtual Assistants 

This is a fairly prescriptive blog post by Rohan Jauhar on how to get started with hiring and managing your own virtual assistant. For many of us, this may seem like a luxury that you don't necessarily need. However, I truly believe that, if managed appropriately, they can help boost productivity and keep you focused on tasks that truly matter. 

Having managed a large team of offshore workers in the past, I will warn you that the upfront effort to train them and get them up to your personal style is fairly significant. 

Rohan's post does a great job of getting into the detail of why and how you can hire a virtual assistant - providing a number of useful templates for each part of the process. Personally, I am considering how to utilize a virtual assistant to help support M&A/origination activities as a number of tasks (e.g. following up with people) can be outsourced in theory.

Buying the Dip

This is a great post by Nick Maggiulli, who writes a popular finance newsletter called Dollars and Data, on the case against Buying the Dip (vs. using a simpler method like Dollar Cost Averaging). Psychologically, the idea of buying the dip feels rationale. If a stock was a good deal when it was up, it should be an even better deal when it goes down in price as well. The dopamine effect you get from seeing the bounce back up and earning an easy 5-10% is quite rewarding. 

The challenge, as Nick points out, is not the fact that you're buying when the stock goes down but rather you're not buying as the stock goes up. Ultimately, stocks (or more broadly, the market) tends to go up vs. down and you miss out on the benefit of investing more as valuations go up. 

The idea of taking a simple approach of doubling down on your winners using a dollar-cost approach for a long period of time sounds like a boring approach. It doesn't require a lot more effort apart from maybe doing research into your winners to see if anything will materially change. Personally, the simplicity of this approach is what makes it so hard for me to follow. It sounds too good to be true (despite the obvious merit behind it). 

Compensation at Berkshire 

This was an interesting read (found through LibertyRPF's Newsletter and written by Adam Mead) on how Warren buffet rewards managers for making investments with high returns. For an investing/compounding machine, the incentive structure for key managers on the operating and investing side can make/break the group's success. 

Here's a breakdown: 

"Base case:

Let's say a BRK subsidiary uses $100m of capital. Buffett perhaps sets a base salary for the person and then incentivizes them by giving them 10% of any profits over a 15% return on capital. 

 The business earns 20% or $20m and the manager gets a bonus of $500k ($20m minus $15m bogey = $5m x 10% = $500k).

Use of Additional Capital:

If that manager wants an additional $100m, say, they're going to want to be very sure they can earn at least 15% on that capital. If they can't then their bonus could be in jeopardy. If profits went from $20m to $30m but they employed $200m capital, then earnings would just meet the threshold and the manager wouldn't get a bonus. Still with me?

Returning Capital:

Now let's say that manager is working under the original scenario with $100m in capital but finds a way to do business with $90m. So they've sent $10m back to Omaha but still earn $20m. Well, that's just another way of saying return on capital increased from 20% to 22.2% ($20m / $90m). What does the manager earn for a bonus?

A 15% return would be $13.5m. So $20m - $13.5m = $6.5m. The bonus, at 10%, is $650k. So that manager has earned an additional $150k by figuring out how to earn the same amount of money with less capital. The manager gets $150k more and Berkshire gets $10m to allocate elsewhere."

The structure isn't significantly different from how Constellation Software incentivizes its M&A and operating managers to deploy capital with a high ROIC. 

Scaling to $100M ARR

This is a great resource put together by Bessemer Venture Partners for businesses aiming to scale to $100M. I will add the caveat that I've seen and spoke to a number of founders who have achieved incredible outcomes without having to meet the standards below. Nonetheless, they do serve as a benchmark for what high-performing software businesses are valued at today. 

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