TIP792: Vital Lessons From History's Strangest Financial Stories w/ Kyle Grieve

The cognitive error of perceiving a relationship between two variables when no such relationship exists.

In Practice: Media falsely linking Ronaldo's Coca-Cola snub to market value drop

Demonstrated by Leg-jdr-001

The deliberate decision not to act.

In Practice: Discussion of Fabius's strategy against Hannibal

Demonstrated by Leg-jdr-001

The recognition that the ability to wait longer than competitors or the market c

In Practice: Discussion of Buffett's quote about the stock market transferring money from the

Demonstrated by Leg-jdr-001

The principle that a dollar today is worth more than a dollar tomorrow due to compounding potential.

In Practice: Discussion of Bobby Bonilla's deferred contract with 8% annual compounding

Demonstrated by Leg-jdr-001

Thinking backward from what to avoid rather than what to pursue.

In Practice: Discussion of Bernie Madoff fraud

Demonstrated by Leg-jdr-001

Apprehension that others might be having rewarding experiences from which one is absent.

In Practice: Discussion of Isaac Newton losing a fortune in the South Sea Bubble due to FOMO

Demonstrated by Leg-jdr-001

Strategic opportunity when sellers must exit positions due to external constraints rather than fundamental assessment.

In Practice: Hetty Green buying real estate at auctions at one-third of appraised value

Demonstrated by Leg-jdr-001

Deploying capital when others are retreating, buying during downturns and panics. Requires holding l

In Practice: Discussion of Hetty Green's approach during the Panic of 1907, calling in money before the crash and

Demonstrated by Leg-jdr-001

Holding cash creates optionality to act when opportunities emerge during crises.

In Practice: Hetty Green holding cash during Panic of 1907

Demonstrated by Leg-jdr-001

The tendency for extreme values to regress toward the average over time. In mark

In Practice: Discussion of Hetty Green recognizing inflation of values before the Panic of 19

Demonstrated by Leg-jdr-001

The distinction between what the market pays (price) and what an asset is fundamentally worth (value).

In Practice: Buffett recognizing AmEx trading at 45% discount after salad oil scandal

Demonstrated by Leg-jdr-001

Primary research conducted by directly observing or interviewing those closest to a business.

In Practice: Warren Buffett speaking directly to bank tellers, bank officers, credit card users

Demonstrated by Leg-jdr-001

Situations where one party has upside without proportional downside, creating misalignment.

In Practice: Discussion of SPACs where creators get 20% of float at reduced prices

Demonstrated by Leg-jdr-001

Exploiting statistical patterns in population data to gain advantage.

In Practice: Discussion of Swiss banker optimizing life annuity value

Demonstrated by Leg-jdr-001

Systematically reviewing failures to identify root causes and prevent recurrence.

In Practice: Discussion of using journals to track thinking process

Demonstrated by Leg-jdr-001

Inflation erodes purchasing power functioning as an invisible tax on savers.

In Practice: Revolutionary War soldiers losing 7/8 of purchasing power

Demonstrated by Leg-jdr-001

The principle that nominal returns must be adjusted for inflation to understand

In Practice: Discussion of the first inflation index bond in history created during the Revol

Demonstrated by Leg-jdr-001

The distinction between stated returns and inflation-adjusted returns.

In Practice: A 5% return with 6% inflation makes you poorer

Demonstrated by Leg-jdr-001

The market pattern where rapid declines are often followed by equally rapid reco

In Practice: Discussion of Black Monday 1987 where the Dow dropped 22.6% in one day but recov

Demonstrated by Leg-jdr-001

The behavioral pattern of selling during market crashes, often locking in losses.

In Practice: Discussion of Black Monday 1987 and principle that panic selling causes missed recovery

Demonstrated by Leg-jdr-001

The tendency to become overconfident and inattentive during good times.

In Practice: Discussion of the danger of complacency during good markets

Demonstrated by Leg-jdr-001

Quintus Fabius's strategy against Hannibal in 201 BCE and Muhammad Ali's rope-a-dope against George Foreman in 1974

Roman general Quintus Fabius employed masterly inactivity against Hannibal, refusing to engage until his forces were reinforced and he had positional advantage. Fabius allowed minor skirmishes to maintain morale but waited for the right moment to strike. Two millennia later, Muhammad Ali used the same pattern against George Foreman: intentionally staying on the defensive (on the ropes), absorbing punishment while Foreman exhausted himself, then attacking decisively in the 8th round when Foreman was tired. Both cases demonstrate strategic patience as a competitive weapon: accepting short-term disadvantage to create long-term advantage. The pattern applies to investing: intentional inactivity while waiting for the right opportunity, rather than constant activity that dissipates advantage.

Discussion of masterly inactivity in investing, drawing parallels from military and sports strategy

Isaac Newton losing a fortune in the South Sea Bubble of 1720

Isaac Newton, one of history's greatest scientific minds, initially bought South Sea Company stock early, profited, and sold. However, as the stock price rose from £128 in January 1720 to nearly £1,000 by August, he reentered the position driven by FOMO (fear of missing out). Even as the bubble burst and the stock crashed, Newton bought more shares on the way down, ultimately losing nearly everything. This demonstrates that intelligence alone cannot overcome emotional biases like FOMO. The parallel to modern investing: even the brightest minds can succumb to herd mentality and the psychological pain of watching others profit. The lesson is that protecting against FOMO requires systems and discipline, not just intelligence.

Discussion of FOMO and the South Sea Bubble, illustrating that intelligence cannot overcome emotional biases

South Sea Company joint stock companies in 1720 as proto-SPACs

The South Sea Bubble of 1720 spawned nearly 200 joint stock company imitators, many with dubious business models. One notable company was described as 'a company for carrying on an undertaking, a great advantage, but nobody to know what it is.' The promoter promised £100 annual return on a £100 investment, collected £2,000 in one day, and immediately fled the country. This pattern mirrors modern SPACs (Special Purpose Acquisition Companies) where investors buy into a vehicle with no defined business, trusting the promoter to identify a target later. Both structures create asymmetric incentives: the promoter gets 20% of the SPAC float at reduced prices, incentivizing them to complete a deal even if suboptimal. The 300-year pattern shows that speculative vehicles with opaque promises and asymmetric incentives repeat across centuries.

Discussion of SPACs and the South Sea Bubble, drawing parallels between 1720 joint stock companies and modern SPACs

Aeroflot Flight 593 autopilot failure in 1994

On Aeroflot Flight 593 in 1994, pilot Yaroslav Kudrinsky brought his children into the cockpit to 'fly' the plane. His 16-year-old son Eldar veered left forcefully enough to override the autopilot, which was designed to disengage at 45-degree angles. Eldar reached 50 degrees, disengaging autopilot without clear indication. The plane descended and crashed, killing all 75 people. The lack of transparency about autopilot status created a catastrophic blind spot. The parallel to investing: relying on 'autopilot' during good markets creates complacency. Hidden risks accumulate without clear warning signals. Just as the pilots didn't realize autopilot had disengaged until it was too late, investors during bull markets often don't recognize when their risk profile has fundamentally changed until a crash occurs. The lesson: constant vigilance is required even in familiar territory.

Discussion of autopilot failure as metaphor for investing complacency during good times

Value Investor

New York Mets Owner

Nomad Investment Partnership Co-Founder

Nomad Investment Partnership Co-Founder

Professional Baseball Player

MLB Player Agent

Scientist and Mathematician

Financial Fraud Investigator

Federal Reserve Chairman

Aeroflot Pilot

Tontine Nominee

Swiss Banker

American Express CEO

Allied Crude Vegetable Oil Refining Corporation Founder

Roman Dictator and General

South Sea Company Director and Founder

Professional Boxer

tontine

Insurance contract providing lifetime income that increases as other investors die, with no principal repayment

“The tontine was almost like a proto-SPAC because you invested in something with very uncertain outcomes.”

Portuguese professional footballer with 668 million Instagram followers

Roman dictator who employed masterly inactivity against Hannibal

Legendary professional boxer

Carthaginian military commander

Co-founder of Nomad Investment Partnership

Co-founder of Nomad Investment Partnership with Nick Sleep

MLB player who negotiated deferred payment contract with New York Mets in 1999

Former MLB player turned agent who structured Bobby Bonilla's deferred payment contract

Investment manager who ran the largest Ponzi scheme in history, defrauding investors of billions

Financial analyst who identified Madoff's Ponzi scheme in 1999 and repeatedly reported to SEC

17th-18th century physicist and mathematician who lost fortune in South Sea Bubble

Director and founder of South Sea Company conversion scheme in 1720

ex-dividend date

Date by which investors must own shares to receive the upcoming dividend payment

time value of money

Principle that a dollar today is worth more than a dollar tomorrow due to earning potential

annuity

Financial product that provides fixed payments over time in exchange for upfront capital

Ponzi scheme

Fraudulent investment operation that pays returns to earlier investors using capital from new investors

South Sea Bubble

1720 British stock market crash caused by speculation in South Sea Company stock

SPAC (Special Purpose Acquisition Company)

Shell company that raises capital through IPO to acquire or merge with existing company

securitization

Process of pooling financial assets and converting them into tradable securities

Consumer Price Index (CPI)

Measure of average change over time in prices paid by consumers for goods and services