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Get a cup of coffee.
In this thread, I'll walk you through "Gambler's Ruin".
This is a classic exercise in probability theory.
But going beyond the math, this exercise can teach us a lot about life, business, and investing.
10-K Diver
11.7K posts
10-K Diver
@10kdiver
I help people understand the fundamentals of finance and investing.
Joined April 2020
- 1/ Get a cup of coffee. In this thread, I'll walk you through Income Statements: a) What they are, b) What key things about a business we can learn from them, and c) Some important caveats we should keep in mind while reading them.
- 1/ Get a cup of coffee. In this thread, I'll walk you through the basics of leverage -- in our personal lives and in the companies we invest in.
- 1/ Get a cup of coffee. In this thread, I'll show you how to read and understand a company's Balance Sheet. As investors, we should be able to judge businesses by looking at their financial statements. And the Balance Sheet, of course, is 1 of 3 key financial statements:
- 1/ Get a cup of coffee. In this thread, I'll help you understand Markov Chains. In life, and in investing, we often come across situations where luck/chance plays a major role. And Markov Chains are often a great way to model and analyze such situations.
- 1/ Get a cup of coffee. In this thread, I'll walk you through one of Charlie Munger's greatest insights: In the long term, the return an investor gets from a business will roughly equal the return the business itself earns on its capital.
- 1/ Get a cup of coffee. In this thread, I'll walk you through the Rule of 72 -- and related "mental math tricks" for investors.
- 1/ Get a cup of coffee. In this thread, I'll help you understand the connections between "earnings growth" and "return on capital". This will help you analyze businesses better, and thus become a better investor.
- 1/ Get a cup of coffee. In this thread, I'll walk you through the P/E Ratio. Why do some companies trade at 5x earnings and others trade at 50x earnings? When I first started investing, this was hard for me to understand. So, let me break it down for you.
- 1/ Get a cup of coffee. In this thread, we'll analyze the "Devil's Card Game". This is a super useful thought exercise. It can teach us several key concepts in economics, probability, betting, hedging, investor/market psychology, etc.
- 1/ Get a cup of coffee. In this thread, I'll walk you through the art and science of valuing a company. The Goal: We want to figure out how much a company is worth -- so we know what's a good price to pay for its shares.
- 1/ Get a cup of coffee. In this thread, I'll walk you through the key differences between *earnings* and *cash flows*. The punch line: Just because a company reports $1 of *earnings*, it does NOT mean the company has $1 more *cash* to distribute to owners.
- 1/ Get a cup of coffee. In this thread, I'll tell you a story about a man and his dog. This will help you think more clearly about volatility, risk, and the relationship between the two.
- 1/ Get a cup of coffee. This is a joint thread; Sahil Khetpal (@skhetpal) and I wrote it together. In this thread, we'll walk you through various "Return Ratios" -- ROA, ROE, ROIC, ROCE, etc. This will help you judge business quality better, and hence invest better.