10-K Diver: Building a Top Fintwit Account and Teaching Finance Principles to Everyone (Pseudonymously!) 01:09:10

Hello, Acquired LPs. We have an awesome, awesome interview today with a pseudonymous account, 10kdiver, so many of you will recognize from Fintwit. David, it's a great interview. Oh, this was so much fun. We've never had a pseudonymous account before. We talk about how he got into this crazy world of Twitter and Fintwit. We

what the purpose of the account is, dive into all sorts of fun stuff, not to mention investing. Some of his favorite mental models and threads over the last two years that he has gone from zero to 200,000 Twitter followers on.

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like Vanta's 7,000 customers around the globe, and go back to making your beer taste better, head on over to vanta.com slash acquired and just tell them that Ben and David sent you. And thanks to friend of the show, Christina, Vanta's CEO, all acquired listeners get $1,000 of free credit. Vanta.com slash acquired. All right, David, with that, let's dive in. 10K Diver.

Great to have you with us here on the Acquired LP Show. Thank you so much for having me on. You bet. And David, correct me if I'm wrong, I think this is our first pseudonymous guest. Yes, for sure. We're so excited to do this. This will be really fun.

Yeah.

The Twitter thread is about the fundamentals of compounding. These are very basic facts. Like, for example, if you have two exponential curves and one of them is growing at a faster rate than the other,

then even if the slower one has a very big head start, the faster one is going to eventually overtake it. Very, very simple facts about compounding. These facts are very important to internalize for a lot of investors. A lot of investors, they understand these things at a very intuitive level. But when it comes to actually putting numbers to these things and doing calculations based on these principles,

I find that there is a definite gap in the numeracy, in how numerate people are. What I like to do in my threads is to just include a few numbers and a few calculations to illustrate some of these fundamental concepts around money.

Most of my threads are kind of like that. They take a particular concept and then they put some numbers to it. And maybe I have an example in there showing how this particular concept applies to a company and so on. I draw heavily upon Morgan Housel's work. I'm a huge admirer of him. His book, The Psychology of Money and the essays that he writes from time to time, they are all very outstanding material.

Of course, Morgan Housel, he doesn't quite have a whole lot of numbers or simulations or things like that. He has a very good idea of what are the key factors that are important in a particular situation. He zeroes in on those key factors very quickly.

He's a beautiful writer. He also expresses these thoughts very clearly and very succinctly. Those are things that I admire. And in this particular case, he was narrating this story about, well, not exactly a story, but a fact about Warren Buffett's journey. The fact is that

Buffett accumulated most of his net worth after he turned 65 or something like that, after he reached the age where most people tend to retire if they have that much money. And he did this calculation. So Buffett actually started buying stocks. He bought his first stock when he was 11 years old.

He just turned 91 or something like that. So he has been compounding for like 80 years. And Morgan Housel did this calculation saying, yes, Buffett is a great investor. But if he had a more normal life where, say, he started investing at 30 years old, and then he retired by the time he was 60 or something like that, a normal investing career, then

then Buffett's net worth would be 99% less than his current net worth or something like that. If he only invested from age 30 to age 60, then he would be 99% poorer than he is today.

Right, exactly. So Morgan comes up with these unique insights. I have a lot of fun reading his stuff and, you know, tweeting about it when appropriate. But that is exactly how compounding works. Most of the benefits come towards the end. And if you're compounding at a

high rate, most of these component graphs, you almost have to plot them on a log scale to appreciate how much things have grown and so on. I found this particular anecdote very revealing. And that's what I included in my thread.

How did you get into this? You have this account, which is amazing, 10kdiver. You have almost 200,000 followers on Twitter. You're a huge part of Fintwit. You only started this like 18 months ago, right? How did you find yourself in this position? So I've always been interested in investing. Ever since I was a kid, when I was growing up, my dad used to be very much into stocks and things like that.

And so if we turned on the TV, the default channel would be CNBC or something like that. And there were a large number of business magazines and business newspapers around the house.

Early on, the importance of saving and investing was drilled into me from when I was a kid. But then I decided to study science and engineering and computer science. So I'm a computer scientist. Even though I sort of knew about the importance of saving and investing,

I did not know even simple things about how the stock market worked and things like that. So when I was just starting out on my investing journey, if you had asked me, is a $10 stock cheaper than a $20 stock? I would have said, yes, a $10 stock is cheaper. So.

So I did not know the most fundamental concepts. And so I had to learn these things sort of on my own by reading books and listening to podcasts and watching YouTube videos and things like that. And so over a long period of time, I sort of managed to piece together all these very basic concepts that

Anybody who goes to business school probably will know these things within the first year. But it took me a long time to learn the fundamentals. And you didn't go to business school? No, I did not go to business school. I'm a computer scientist by training. And we should be clear, not a computer scientist working in finance at a hedge fund or anything like that. A computer scientist in a totally unrelated field.

Right, exactly. I'm a computer scientist who works in scientific computing, designing simulation software and things like that. I don't want to ask for your exact age because I like to, you know, we want to keep your pseudonymity around, but can you give us like an age range? Sure. I'm between 30 and 40. Great. Did your Twitter journey inspire you to become super knowledgeable or did you start your study before starting the 10kdiver Twitter account?

Right. So I started my study around 2011, well before I started the Twitter account. The Twitter account was started sometime in 2020, I believe. So I'd had a good nine years of reading investing books and various podcasts and going through YouTube videos and things like that before I typed my first tweet. And the reason I started the Twitter account was because I could see that something special was developing in FinTwit.

As you guys probably know, Twitter has all these various silos. So there is politics Twitter, and then there is sports Twitter, and then there is vaccination Twitter these days. For lack thereof. Yeah, absolutely. So there is a large number of sub-communities within Twitter. And for a very long time, I was lurking on FinTwit, finance Twitter, but I hadn't actually posted anything to it. Over the years,

Over time, I saw that this community was becoming more and more valuable. There were lots of highly accomplished people, people whom I admire who are joining the platform, who are contributing all kinds of insights and so on.

And people were forming very meaningful relationships on Twitter. They were initiating these relationships on Twitter and then developing them further in real life and so on. I wanted to be part of this community and I felt that I could contribute because I was a non-finance person. So I could sort of make sense of what some of these investors on Twitter, the finance people on Twitter were saying because I had studied these topics for a while.

But then I could also see how most people would not be able to make sense of these kinds of tweets. And so I could sort of be like a bridge trying to connect non-finance people to financial concepts. And that's how this whole thing got started. Honestly speaking, I did not think it would become so popular in such a short period of time or anything.

anything like that. A large part of that has to do with luck. So if you're noticed by the right people and retweeted by the right people and so on, overnight, you can get tens of thousands of followers. So I've had that experience a few times. I have two reactions to that. And I think both are true. One is that things like what you are doing is a great service. And if you...

had did it at the quality level you are doing, eventually you would get as big as you are now, no matter what, because I do feel like great content eventually does get rewarded. And yet also, you started doing this at the exact perfect time, right? Like, right as the pandemic happened. And so many people, you know, the whole Robin Hood situation, so many people started getting interested in finance and investing and trading for the first time, like,

right there you were to be able to translate some of these more advanced concepts or things that hardcore long-term investors would know to the general public. Absolutely. So timing may not be very important in the market. Time in the market is more important than timing the market, as the saying goes. But in my case, with this Twitter account, maybe timing matters a whole lot. Yeah.

It's all back to compounding, right? What were your early tweets like? And then how did that change as you started to gain followers? I'm curious. This is the classic, how did fame change you question? But how did you start to sort of morph as you saw what worked? I try to have fun with my Twitter account. I like to write threads on things that personally interest me a lot.

I try not to bother too much about how large an audience would resonate with a particular topic or something like that. So, for example, I wrote a thread about generating functions, which is a kind of an arcane area of math. Even a lot of computer scientists and others who are generating functions are a way to solve recurrence equations, essentially.

Is this what Y Combinator is? Isn't a Y Combinator a function that generates other functions? Well, so Y Combinator is a particular concept in functional programming. So there is this whole area of computer science which is devoted to languages like Lisp and Haskell and very elegant programming frameworks, how to think about giving a computer a sequence of instructions and so on. Right.

But in math, there is a book called Generating Functionology. And the first sentence of the book goes something like, a generating function is a clothesline on which we hang up a sequence of numbers for display. Essentially, you have a sequence of numbers, say A1, A2, A3, A4, and so on.

The generating function is basically you plug one into the function, you get a1. You plug two into the function, you get back a2. A generating function is something like that. But well, the point is that it's a fairly arcane math topic. Although it can be used to solve a number of equations very nicely by hand. You don't need a computer to solve some equations if you know about generating functions. But

Most people just solve those equations using Excel or whatever. So they don't have to know the theory behind generating functions. And I find the theory fascinating. And so I wrote a thread about it. And...

very predictably, you know, it didn't get that many likes or retweets or anything like that. But I still find the topic a lot of fun. Is there math twit the same way that there's fin twit? Like, is there? Oh, yes, there is. Did it find its way into that? Or have you had other tweets find their way over toward math twit? That's an interesting question. So that is most definitely a math twit.

Some of the people whom I follow on Twitter are actually sort of the bigwigs in math. There's one guy I particularly like called Steven Strogatz. He's a math professor.

He not only excels at doing math, he also excels at explaining math. He has this wonderful book called Infinite Powers, which walks the reader through the history of calculus, why calculus was invented, what were the motivations of the people who were first inventing calculus, Isaac Newton and so on.

So there is definitely a math twit. Although my sense is that my audience is largely people who are on fin twit and not so much people who are on math twit because the math twit people tend to be a lot more rigorous. And I think they see me as mostly an account about investing. Okay.

Other than wanting to be part of it, did you have any other intentions? Was there this could lead to something either business wise or investing wise? What were your expectations? As Charlie Munger said, you know, the secret to happiness is low expectations. And...

I just wanted to have fun. I didn't really have a whole lot of expectations associated with it. I wanted to help people sort of learn the same concepts that I did, but not go through as much time and effort as it took me. Most concepts in finance and investing, they're fairly simple. If you understand basic math, you know, basic probability, basic compounding, things like that, most of the concepts are fairly simple. But if you understand basic math,

But there is a lot of jargon in the field, especially when you have accountants and people like that involved. All these debits and credits and contra asset and contra liability accounts and all that. A lot of this complexity is not really necessary if you want to understand the basics that are going on.

So I just wanted to help people understand the fundamentals and have an easier time of it than I did. That was basically the whole goal. And I wasn't thinking too much beyond that.

Has 10K Diver become a business for you in any way? Or do you want it to? Or like, what are some of the things that it's led to? Right. The basic mission is still largely the same to help people understand the fundamentals of finance and investing.

But now that I have sort of got all this traction, I sort of have to figure out a way to reach as many people as possible. Along the way, lots of interesting opportunities have sort of come my way simply because I have this Twitter account.

So, for example, one such thing that I'm doing, I just started recently, is this social podcast that I have every week on Sunday at 1 p.m. Eastern. We have this little group of investors and we sort of meet virtually through this app called Call-In.

Is that David Sachs' app? Yes, yes, exactly. That's awesome. Right. Yeah. So there is this social podcast. People come on, they ask me questions, and some of the questions have to do with the week's thread that I put out. Sometimes the questions have nothing to do with the week's thread, but have some tangential connection to investing. It's a lot of fun, and we just do that on Sundays. That is something that probably

probably wouldn't have happened if I did not have this Twitter following. So in that sense, there are several opportunities that sort of just knocked on my door because I had this Twitter account.

We just registered 10k Diver LLC last week. We want to do something to try and make this a business. But what exact products will the business offer and things like that are not very certain at the moment. So some people have suggested that I should...

I should use a platform like Teachable or something like that to create a course. Someone who's just following me for the first time, if they look at all the work that I have done before, they will see that I have a large number of threads and

They are not particularly well-sorted or anything. The topics covered are... They're all over the place. You do have a nice website, though, where you at least link to the threads. If somebody just finds you on Twitter, then it's... Twitter is so not made for this. And that's one of the great things. Twitter gets shoehorned into all this stuff.

But if I just go follow 10kdiver, you're just like dropped right into like a sea of this, right? There's no organization or anything. Right, exactly. So Twitter doesn't really... I think there's a bit of a mismatch between the kind of content that I like to put out and what Twitter is built for.

I like to think that most of my content is kind of evergreen. So fundamental investing concepts that don't really change with time, like how to do a DCF or something like that, or what is inventory turnover, what is operating leverage, these things don't change with time. It's important for an investor to understand all these concepts. But Twitter is

It popularizes things that were tweeted out yesterday and today. Whatever is tweeted out yesterday is sort of forgotten by tomorrow, even if it's something that's relevant for life, right? So there is a timing mismatch between what Twitter is meant for and what my content tends to follow.

People who just get acquainted with my Twitter account, they have this large number of threads that they see, but they are not sorted by order of difficulty or what should they read, what order should they read them in. And there are gaps between threads as well. There may be a thread about

topic A and another thread about topic C, but topic B, which lies right in the middle, there may not be a thread about it yet. There's almost like a Khan Academy style opportunity here where right now it's sort of disorganized and it's exclusively and the Twitter thread format actually is a pretty great learning format, which is I think why it creates this opportunity to

go viral and get so much engagement so quickly. And, you know, you really can have these amazing takeaways from it and sort of learn at your own pace as you scroll through the threads. But you're right that unlike Econ Academy, which is like, you just learned, you're in the accounting course, and you just learned about balance sheets. Next thing we'll do is income statements. It's, you know, obviously threads don't lend themselves nicely to that. Exactly. So people have suggested that I should create a course for

that starts at the basics and then walks investors through...

well, when I say investors, walks investors who are just getting into investing, people who are just trying to invest their money personally or something like that, just walk them through the basics and cover most of the important concepts that they will need. Maybe not generating functions or options or anything like that, but just the fundamentals. And I think that's a good idea. There is definitely need for a course like that. If I had a course like that when I was starting out

I might have learned a lot in a short period of time. So I can see the merits of that. So that could be something we do, although it also may not be something we do as the direction is fairly unclear at this point. It's interesting, right? Like, yes, that is a valuable product. Yes, you're in a great position to provide it.

But because of what your accounts become, and you've got some incredible people who follow you and love your work, like past acquired guest Ho Nam loves you. I know he's always interacting with you and tweeting with you. The feeling of respect is mutual. I very much like Ho Nam's work as well. Ho is just the best. But it's interesting, right? Like you, in some ways, the most

from a certain perspective, valuable part of your account are the most advanced users, so to speak. Like Ho probably doesn't need an introductory course, and yet he may be the single most valuable person who follows your work. We could all take an introductory course from Ho.

What Ho has forgotten about investing is probably more than many of us will ever learn about it. 10K, I'm curious, you're talking a lot about investor education here as the business. There's sort of a question that begs asking, which is, would you take on investor capital and start a fund or some form of structure where you invested on behalf of other people? At this stage, I don't have any plans to do anything.

anything like that, mostly because it's a tremendous amount of responsibility to be responsible for other people's money. And I tend to stick to companies that are fairly safe investments, companies that I understand. So my style of investing is

is more geared towards preserving capital. So I have sort of done some back of the envelope calculations and come to the conclusion that, okay, if I'm able to get a 10 to 12% return per year,

through my investing. That should leave me reasonably comfortable in life. I try to set things up so that the bar for me is fairly low to cross. If you manage money professionally, your mandate is sort of to get the highest possible return for your clients.

Or the lowest risk return, you know, depending on the style in which you're managing money and the agreements that you've come to on what you're doing on behalf of your investors, it could be to achieve the lowest possible risk with a fixed type of return. Right. So this is exactly satisficing versus maximizing a trade off there. Yeah, I'm much more of a satisficer than a maximizer.

The returns I get, most people may not be very excited about it. It's sort of a very safe kind of investing philosophy. I'm sort of happy with just learning the concepts, helping others learn the concepts and just being an educational Twitter account for now at least.

Well, which is so funny. And I love that on Twitter, you can build a big following for that and intersect with us and other folks in FinTwit. We're the opposite. What we do in venture, despite what we cover, Buffett and the like on Acquired, we're total maximizers. We just all kind of get put in this town hall together. So I'm curious...

Now, having gone through this journey with Twitter and with FinTwit of going from, you know, lurker to starting as a content creator to now being a big content creator and part of the community like.

What's your take on Twitter? It's interesting, right? For us at Acquired, we use Twitter a lot, but it's such a small part of what we do relative to the reach of the pod. And we haven't quite been able to figure out. And I feel like a lot of people think that. What's your experience? So my experience has been...

overwhelmingly positive with Twitter. Twitter is sort of the reason that I'm on this podcast, for example. I've met so many interesting people through Twitter, you know, a large number of people who sort of are my heroes, people like Michael Mauboussin or Sanjay Bakshi or people like this whom I would have never had a chance to meet in real life. I now sort of have DM interactions with them and things like that. And so I'm

Twitter has sort of given me the opportunity to connect with so many people. That's great because an anonymous account like mine, it's only the ideas that matter. It's not the person behind the account that matters. So that is very, very egalitarian. That really appeals to me.

Of course, there is a nasty side to Twitter as well. Twitter itself as a platform, it has perhaps not developed at the pace that most of us would want it to develop. They're just getting into, for example, this Twitter spaces. They're just getting into things like they just bought this newsletter company called Review, things like that. So they have been fairly slow to roll out new features.

But the basic product itself, there is a lot of value to be gained out of it if you are sort of persistent with it. Unfortunately, a lot of people aren't very persistent. So if you just go and create a new Twitter account, it's kind of hard to find who the right people are to follow and things like that. You have to sort of come back to it every day and see

read tweets in your feed and you stumble upon people by accident almost. If you stick with it for a long time, then over a period of time, you develop this social network. But I don't know how many people are interested in sticking around for that long.

It's fascinating because the purists in us who have been using Twitter for a long time, I've been resistant to so much of the change that actually makes it a much more accessible product. Like I used to, for almost a decade, I read every single tweet. I think the phrase is completionist. And this was before...

Wait, every single tweet? Every single tweet that was by someone I followed. And so for the longest time on Twitter, there wasn't an algorithmic sorting and you just saw a real-time feed of everyone you followed and you saw every single one of their tweets, no matter if it was going viral or not. And you still can do this if you go to the top right and hit view latest. But...

When they switched it to an algorithmic feed, I remember feeling like this is a violation of the product that I love. But my tendencies of, well, I just want it to be like a very primitive service that doesn't work on my behalf, that I just I identify who I want to follow. I follow them. And then I want to see everything they're tweeting in the order in which they've tweeted it.

That is not a very accessible service. They're not going to grow their user base that way. It's very difficult to onboard. You have to stick with it for a long time. And of course, now they're going even further where like, not only is it an algorithmic feed of the most interesting stuff from the people I follow, but they're showing you stuff that other people liked. Like I'm getting stuff now that's like, seems like you like cryptocurrency. So here's a trending tweet in cryptocurrency, which is,

To me, of course, I'm like throwing up all over it again because I'm like, this is not why I use Twitter. But I understand why that's a very good business decision for them. Right. Absolutely. So they are trying to maximize for engagement. There are always two sides to that coin.

I don't have a particularly strong view on this. I'm reasonably happy with my feed and I'm happy with the people I follow and so on. So I still get a lot of value out of Twitter just by reading what I see.

what shows up on my feed from time to time. You're right. It feels a lot like serendipity. So you just have to stumble upon things on Twitter. It's kind of like a, almost like a visit to Costco, you know, you just stumble upon something and you buy it and you find a great product or something like that.

How do you consume Twitter now that you have this huge account for publishing? Do you use the 10K Diver account to also consume Twitter or do you have a different method of consuming? No, I just use the 10K Diver account. So I follow a bunch of people. From time to time, I check my feed, come across some things that seem interesting. If I come across something, but I don't have time to review it, I put it into my bookmarks.

And then I never read those bookmarks. Yeah, it's like read later on Safari. Like, I have no idea what's in my read later. But I do have a very long list of bookmarks that I mean to get to at some point. Two things have changed.

since I became this sort of content creator on Twitter, how I use Twitter. One important thing that's changed is I now use DMs a whole lot more. So when I was a lurker, I wouldn't DM anybody. Nobody knows who I am or anything like that.

But these days, it's so great that when I read something, if I read an excellent book by somebody or I read a very nice article written by someone, chances are they are on Twitter and I can send them a note from the 10k Diver Twitter account. I can send them a note saying, hey, I really love this article of yours. What do you think about these two follow-up points or something like that? And

Usually people respond and then we end up having a very nice discussion. It's kind of how I reached out to you guys after your wonderful Buffett Marathon podcast series. Oh.

Thank you. That's how we connected. And that is, I just think, like one of the most amazing things about Twitter that people do respond to DMs. I remember Ben and I were talking about this. Tim Ferriss talks about how Twitter DMs are his primary way of getting podcast guests now. He's like, people won't respond to email, but they respond to Twitter DMs.

And it's this like magic thing that I think most people who use Twitter, I would imagine 99% of people don't use DMs. And yet it unlocks like so much if you do. Yes. In my experience, it's been a very, very, very powerful feature of Twitter. Yeah.

Yeah, the way that we got in touch with our last guest on our last special, which I think will be out by the time we ship this, Brendan Eich, the co-creator of Mozilla, and I think there's a chief architect at Netscape and the Brave browser now. Twitter DMs, there's something about it where you're much more likely to respond than if you get some long email or email that has the capability to be long where you're just like, too much. One main feature of Twitter DMs, I don't think they intended it this way.

you can't mark something as unread. So if you read it, you either respond to it right away or you forget about it. Or it's gone. Yeah.

So that may actually encourage people to respond. That's so true. Because I think about that with Twitter DMs and with iMessage and texts. I'm always like, gosh, I wish there were an unread so I would know which one. But you're so right. I wouldn't respond to it. It would be like my bookmarks folder. I'd never go there. So it actually, you're right. It actually encourages much more higher response rate, I think, with DMs. Right. Exactly. Exactly.

The other thing that has changed since I became a content creator is that I spend more time in notifications these days because I get a lot of notifications and many of them are very sort of, if I write a thread, someone will comment on it, mentioning something that I've never thought about when I wrote that thread and, you know, suggesting ideas for follow-on threads or asking questions.

simple questions that I can then answer and so on. So I spend more time on notifications than I used to. How do you generate the ideas for the threads? And then how do you manage which ones you're choosing to go do work on right now to create as your next one? So I have a list of potential thread ideas on my phone.

And I read a lot. So any given time, I'm reading a bunch of books on investing or I'm reading some articles and several newsletters and the Wall Street Journal and, of course, 10Ks and 10Qs. That's the whole point of the account. So I read a bunch of things. And as I go through all these different kinds of material...

I keep an eye out for topics that could become future threads. And I also listen to podcasts and so on. Whenever I'm consuming content related to investing, I sort of keep an eye out for topics that could become future threads. When I find such a topic, I add it to this list on my phone. That list is now very long. When the time comes to write a thread,

I usually just scroll through this list and pick one topic and then write about it. It's not a very scientific method, but it just works. Do you have a regular cadence that you write on? Or is it just when the mood strikes you? So I like to put out a thread approximately once a week. So I like to put it out on Saturdays.

And usually I will have a plan for when I should write this thread. So if I want the thread to be out on Saturday morning, say, by Wednesday, something must be ready. And then by Thursday, a certain number of simulations must be done and so on. So I have a mental idea of what's required for that thread.

And then, of course, life comes in the way and I haven't started anything until Friday evening. And so on Friday evening, here I am in this sort of panic mode. Have you ever seen the TED talk from... Tim Urban. Tim Urban, yes. The procrastination monster. That is me. The procrastinator and the panic monster, that is me to a T. Yes.

That's a wonderful TED talk. You know, I have always kind of been like this. Tim Urban articulated it so beautifully. As I was watching through that video, I sort of recognized myself in what he was saying. I hadn't even thought about it in such clear terms myself. That is exactly who I am.

As I look through the topics of threads that you've done, it occurs to me none of these is a single deep dive into a 10K. And I remember when I first started following you, that's what I sort of thought I would be getting. I was like, oh, there's going to be a really interesting 10K that comes out, and this will be a good way to summarize it. Is that a common misperception? I'm sure some people read the name of the account and think that this is what the account should be. And I don't blame them. If I read the name of the account, that's exactly what I would think the account is about.

Almost like a podcast about acquisitions. We'd never even talk about acquisitions anymore. When I started the Twitter account, I did not have a very clear picture of what I'd be doing with this account. And one of the things that I thought I'd do with the account is just take a 10K and look at some particular aspect of it and try to draw lessons from this particular aspect of the 10K account.

that are more broadly applicable. So for example, take the notes to the balance sheet or something like that. And the notes to the balance sheet will have something about debt and the debt repayment schedule or something like that. And then talk about, okay, so how much debt is okay for a company to have? When is the amount of debt too much? And so on. So I thought, okay, take something from a 10K and then help drive it to a broader audience. That's roughly what I thought the account would be.

And then I sort of figured out that it's a lot easier to work with fictitious examples than with real examples. It's really hard to make 10K content attractive. Well, one, it doesn't get you into trouble because once you mention the name of a real company and a real 10K, lots of people have all kinds of feelings about it. You stay clear of all that if you just deem...

deal with fictitious examples. And the second reason is, you can make the example as simple as you like. Whereas real 10ks, real companies are never that simple. So if you want to highlight one particular concept, like, for example, how much debt is it okay for a company to have?

You can talk about cash flows and so on and say, okay, what are the cash flows of the company and how much is required in interest payments and principal repayments and are the cash flows enough to meet these kinds of payments? If the cash flows are enough, then the debt is probably okay. If the cash flows are uncertain or very volatile or things like that, then it's not okay.

But if you wanted to illustrate this with a real company, there are so many things that go into the cash flows. So then you have to get into, okay, how do you predict what a company's normal cash flows in a normal year are and so on. Now, that is a completely different thread topic on its own. So it's very easy to get boggled in complexity when you're dealing with real companies. Whereas if you're trying to

use this account as an educational account to focus attention on one particular concept. It's a lot easier to work with simpler examples than real 10Ks.

There was a bit of a pivot there. I don't dive into 10Ks as much as my name would suggest. Well, I have another question related to your content, which is sometimes it's a fundamentals of investing concept. Like you talked about not only the DCF calculation thread, but then the reverse DCF calculation thread. Or you have 401Ks and rebalancing a portfolio between stocks and bonds. These are like fundamental investing concepts

academic concepts. There are other ones that are more like Charlie Munger mental models, where you start to think about like volatility versus risk or decision fatigue, or I'm looking through some of these other ones here, the concept of a half-life. I'm curious which you sort of enjoy more right now, like what's your favorite flavor, or do you like sort of flipping back and forth between those?

I guess I like flipping back and forth, but I don't think there is even one thread that I did not enjoy writing. The great thing about having an account like this is you don't have to put out anything that you don't enjoy writing. Right. It's anonymous and it's not a business right now. So it's... I generally enjoy wrestling with all kinds of different ideas and so on. And so, for example, I wrote a thread about escape velocity. Okay.

On the face of it, there's nothing to do with investing on anything like that. It's how much speed you should give an object so that it escapes Earth's gravity. That's basically, it's a physics problem.

I wrote a thread about it simply because I enjoyed delving into it. And half-life is something that's very, very similar. So you have a radioactive compound. And how long does it take for the amount of radioactive substance to shrink to 50% of what it was? These are all concepts that don't have much to do with investing on the face of it. It so turns out that if you look at the math for how dollars lose their value through inflation,

You can come up with something called the half-life of a dollar. How long will it take for the purchasing power of a dollar to shrink to 50 cents? So I find these ideas interesting. A lot shorter now than a few years ago. I was like, who's going to make the joke? Yeah, somebody had to do it. 10K, it does lead me to the question of

Take a minute to think on it if you'd like, but what's an example of a Twitter thread that you did that led to a decision that you made in your own personal investing? Perhaps it's due to an interaction with someone where they chimed in and gave you new information or pointed you toward a new concept or a new example, or perhaps it's because you decided to do a thread on something and then became fascinated with the concept and chose to invest in a company because of that.

Do you have any sort of direct examples where, but for doing this, you wouldn't have made a certain investment decision? There are some threads that I've done. And I have had discussions with other people following those threads. Those discussions sort of raised some points. And those points led me to think about certain companies in a certain way that I would not have thought about in that way before. So...

I don't want to talk about any personal investment that I've made, but I did invest in one subscription type business. And normally, when I invest in companies, I look for very stable cash flows and evidence that there is a strong return on capital and so on. I don't like to invest in companies that are not turning a profit or that are cash flow negative and so on.

I've written some threads about concepts like owner earnings and earnings versus cash flows of a company and so on. And there is a particular thread that I wrote about LTV versus customer acquisition cost. These threads sort of sent me into discussions with a bunch of people. I've had discussions on Twitter with people like Trent Griffin and Professor Michael Mauboussin and so on.

Professor Mauboussin recently came out with this wonderful paper called One Job, The One Job of an Investor. And in that paper, he articulates beautifully how modern companies, they have so much investment in intangibles. So they invest far more in intangibles than in tangible assets. And this kind of has two effects. One is all

all these investments that these companies are making, those investments are all expensed on the income statement rather than being capitalized on the balance sheet. And so this has the effect of lowering reported earnings. That is point number one. And the second thing is because these assets that the company is buying essentially through this investment, because these assets have not made their way through the balance sheet,

If you calculate a return ratio, like return on assets or return on invested capital, just off of the reported numbers, you will get much higher figures than what is actual economic reality. The return on assets of a company might be 60% or something like that if you calculated it just off the reported numbers.

But the assets may be understated on the balance sheet because all these intangible investments are not included in the assets. And these intangible investments, these being things like customer subscriptions or R&D or engineering or all sorts of stuff. Exactly, exactly. So this way of thinking about what the true numbers should be versus what the reported numbers are, this has sort of changed my investing philosophy. And I've invested in a subscription business recently.

Because of this, and even a few years ago, I don't think I would have invested in that business were it not for writing this thread and these follow-up discussions and reading Professor Mauboussin's work and so on.

And is that because like you look at the subscribers as an asset, even though it doesn't show up on the balance sheet as an asset, it shows up under like customer acquisition costs as an expense on the income statement? Or like, can you be a little bit more concrete on how thinking about intangibles as assets instead of expenses works?

might have impacted that decision? Right. So it's as simple as going through the income statement and looking at the sales and marketing figure and the research and development, those two line items in the income statement.

Previously, I may have just taken them at face value. But now I sort of dig in a little more and think about, okay, how much sales and marketing and how much R&D does this company actually need to do its current job to earn its current cash flows versus how much is it reporting on the income statement? The difference between the two is

is essentially what's being spent on intangibles, right? So if you take Professor Morberson, he has this example, he says that Facebook, for example, whatever money they are making right now, whatever cash flows they are making out of the existing Facebook platform and Instagram platform and all that, they can probably do that with 50% of their workforce, right?

Or even lower. They don't need to employ all these people and, you know, work on all this. They could probably do that with 50 people. Period. They might very well be able to, especially if they're able to replicate whatever model of robot Mark Zuckerberg is just...

create a few few replicas Isaac Asimov has this wonderful series of science fiction stories where you know humans

designed robots, but then the robots become so intelligent that they start designing the next generation of robots on their own. And that really kicks off all kinds of innovations and so on. Michael Mauboussin has all these nice examples. And I would have never thought about a company like

like Facebook that way. So if they stated, okay, we spent so much on stock-based compensation for employees or something like that, I might have been much more inclined to take it at sort of face value before reading all this stuff. And then after

It's so interesting that when these rules were developed, Facebook was able to manage the show.

It made sense based on the way that businesses were run, which was everything is tangible. All investments are tangible. But now, I think to your point and to Michael's point, the way in which you need to analyze...

the business's intrinsic value and the way that it will make money going forward is not identical to the way that accounting standards say that you need to report, which is this fascinating era that we're in where, as you're saying, you now have to do the work. You can't just trust the accounting figures at face value. Right. At least for some businesses, absolutely. That's right. And I think this always used to be true, even in the past, that

commonly accepted ways of analyzing businesses. There are always businesses that don't fall neatly under that type of analysis. And people who are able to sort of spot those businesses early on and invest in them, they tend to generate enormous amounts of alpha. So, for example, this whole idea of Ben Graham's that you look at the balance sheet first and foremost. You

You look at the assets the company has, the net tangible current assets, and you look at the price and you try to pay less than assets for the company, essentially. So that is investing entirely through the balance sheet. But then when Buffett bought something like See's Candies, he was actually investing through the income statement because he sort of understood that, okay, here is a brand and it's a durable brand.

You don't really care how much assets Seas Candies has or anything like that. You care what it earns every year and how much of those earnings an owner can just take out of the business. That was something like going from a purely balance sheet driven investment process to something that's much more income statement and cash flow statement and owner earnings and all these concepts. And because Buffett was...

very early on to catch on to the power of a brand.

Coca-Cola is a brand and See's Candies and now Apple, for example. Buffett was very early on to catch on to this new way of investing. When he bought See's Candies, lots of people thought he had lost his mind. What are you paying? Whatever, six times book for a chocolate maker or something like that. So people who are able to come up with these fresh insights, they

if they are right about those insights, they stand to gain a lot. And so the landscape of investing has always been changing like this. And this whole idea of intangibles and looking at the interplay between what gets reported on the income statement and what gets reported on the balance sheet, what is expensed versus what is capitalized, that might be the

modern day equivalent to changing the way you think about companies and return on investing and so on. One thing I wanted to circle back to, I noticed you said you like to post on Saturday mornings. I'm curious what the reason is for that. Well, my first thread, I posted it on a Saturday morning. I don't remember if it was a Saturday morning or a Friday morning of a long weekend. Right.

So it might have been Friday, but it was a long weekend. So Friday, Saturday and Sunday were off. The insight there is basically that if you're going to be posting not about the daily news or something like that, not something that is time sensitive. If you're going to be posting about a general investing concept,

You get down to people's feeds early in the weekend. That generally boosts engagement because people at this point, they know sort of what to expect from my account. It's not going to be some breaking thing that they have to read immediately or that has immediate relevance or anything like that. It's a broad set of concepts. And people just have more time during the weekends to dig into that sort of thing. Oh, this is fascinating. Well, the reason I asked is,

Because it seemed to fly in the face of what is the traditional canonical, like, oh, release content on Tuesdays. And frankly, it is objectively true that Twitter has less people using it on weekends. But...

Sure. There's also the possibility that I'm doing it all wrong. Sure.

It's true. Have you ever tried a Wednesday? No, but maybe I should. And maybe we should try releasing episodes on Saturday mornings. On Saturday, yeah. That's what I'm thinking. Well, let's switch for the next month or so, and then we'll report back to each other what we find. And we'll come back and we'll say, well, there were a lot of confounding variables, and so I don't know if it worked or not. Yeah.

The other thing you said when we were talking about the process of Twitter posting is you said you run simulations. What do you mean by that? I'm mostly a Linux user. I don't use Windows or macOS. I'm doing this call on a Mac, but it's my wife's Mac. It's not my Mac. So I don't have Excel on my computer. I have a spreadsheet program, but it's not Excel.

So my computer is a very, very basic thing. I'm one of those terminal command line users. So most of my work I do by typing commands into a computer terminal. This is not the way most people use computers. When I want to say, okay, a company has a particular growth rate and a particular return on capital, what's the present value of its future cash flows or something like that? If I want to calculate something like this,

for a thread, I essentially write a computer program to do that. It's not that, you know, a spreadsheet is kind of a computer program anyway. I mean, you can run simulations in Excel, sure. But like, I don't know many finance professionals who do. I don't either. But Excel may be a great tool for all I know. And I know many people who swear by it for all kinds of things. But

But I find it a lot easier to work with a general purpose programming language, maybe because I'm a computer scientist. I write all my programs for this particular Twitter account in Python. I was going to say, it sure looks like some of these graphs that I'm looking at are like some kind of Python graphing library.

Yes, I make heavy use of this library called matplotlib. It's a wonderful tool for all kinds of plots, bar plots and pie charts and basically any kind of plot you want in Python. matplotlib is kind of the default library to go to because it's just so it's got such a complete set of features. And is all this handwritten stuff actually handwritten and you scan it in?

Yes, it's all handwritten, but it's not scanned in. I have an iPad and I have a pencil, the Apple, the revolutionary pencil that they had. If you see a stylus, we blew it. Yeah.

And you do a really nice job. Like whenever you have something like one minus I over one plus IR minus, you know, you're color coding and staying consistent and you have nice handwriting. And so it's like, you know, I think we've all had math professors where we try to follow their work and we were like, I have no idea how step one correlates to step two. You sort of show the variables flowing through nicely. Thank you so much.

You know, even with great handwriting and good color coding and all that, most people are probably inclined to skip the math. And if your handwriting is bad and you don't do, you don't make an effort to make it easy for others to understand, the math will almost certainly be skipped through. Yeah. Yeah.

Anyway, I'm so happy that Steve Jobs didn't quite get to make this particular decision at Apple. So thank God they invented the Apple Pencil. I think it's apocryphal to say that Steve Jobs never would have come out with the Apple Pencil because I think a misunderstood characteristic of him, speaking as someone who's only...

I've never met him. I have only just watched every single Apple keynote ever and read everything about him and all that. Everything a proper obsessed person would do. Yeah, I still go back time to time and watch the MacBook Air reveal and so on. So good. Classic. There's this envelope that is just lying there seemingly for no reason at all. And then he pulls out this laptop from inside the envelope. It's just...

The showmanship is just amazing. And pioneering. I think we forget, because everyone does these keynotes now, I think we forget how revolutionary it was to care this much about making a show of these product introductions. Sooner or later, everybody copies Apple. Totally.

I think it was a Steve Jobs strategy to insist that something was the way that something should never be done until the moment where it made sense for Apple to have that in their product lineup. And then it was a full-throated, unabashed argument of why this is the best thing ever without ever acknowledging that it is contradictory to previous statements. It just worked so well for him. It worked so well for the company. I kind of love the, like...

I don't give a shitness of it. I don't know. It's unapologetic. I think one of the hallmarks of a visionary is that they should be able to change their minds when they see a new piece of technology that they did not envision before. And Steve Jobs was very, very good at understanding how new technologies could change.

completely changed the way people were doing things. And sometimes he would make these unfortunate statements that this is never going to work or something like that. But then he's always sort of focused on delivering the best possible product. And if that means changing his stance on something that he said previously, so be it.

As Gandalf likes to say, you know, in the Lord of the Rings, even the wise cannot see all ends. So even Steve Jobs cannot see all ends. But when he sees something really compelling, he changes his mind. And I think that's exactly the right thing to do, the right approach.

I love it. As we drift to the end here, as Ben likes to say, you got to be like in a very small population of FinTwit users who are composing tweets and threads on Linux, writing your own simulations and running command line interface. And yet you are self-proclaimed a very conservative investor. Have you invested in tech over the years? And if so, how? I have invested in tech over

But it's sort of the kind of tech that I believe has durable competitive advantages. For a very long time, my use of Linux actually blinded me to what a great business Microsoft was. And for the life of me, I could not understand. You know, here I was, Linux is this free operating system.

I have pretty much everything that Windows does and probably better. So why are people still paying for Windows and Excel and Word and all that? Aren't there open source equivalents to everything? And you had all these viruses and this and that. This was a few years ago on Microsoft. So I just couldn't see what a great business model Microsoft was. But

But since then, I have sort of changed my thinking. I've tried to go out and understand what businesses in tech have durable competitive advantages. So something like Google, for example, today, it's very, very hard to unseat a company like Google. I

I think they have six or seven distinct products with over a billion users. There is the Google search and then Gmail and Maps and YouTube and Android and Chrome. And there's like six different products, each used by more than a billion people across the world. They have a phenomenal franchise that just prints money.

So I tend to invest in companies like Google, where I think they have very strong competitive advantages. But one thing I don't like to see in such companies is a lot of tech companies tend to share a few things that I don't like. One of them is that

It's a badge of honor for tech companies not to give out dividends, but to just pile on cash onto the balance sheet. No, I have nothing against piling on cash. But at some point, you have to use the cash to do something interesting, to invest or invest into ongoing operations or, you know, whatever, build a metaverse or whatever, acquire some other company.

If you just keep piling on billions and billions of dollars of cash year after year, don't give it out to shareholders and also don't invest it anywhere. That's just what a waste. I mean, I don't like that particular trend among tech companies. The other trend that I don't like is a number of tech companies, they have these very generous stock-based compensation plans. So they dilute existing shareholders to the tune of 5% or 6% a year, right?

And I normally shy away from those types of companies. So I do invest in tech companies, but I must be reasonably sure that they have durable competitive advantages. They're not just going to be overtaken by a competitor overnight or something like that. They shouldn't be overly generous with their stock-based compensation practices. And

they should be reasonably good about returning money back to shareholders, not just piling up money for the sake of piling up money, but return money to shareholders or invest it into continuing operations in an intelligent way.

Once you list these three characteristics, that eliminates a very large part of the tech universe. So while my portfolio does have some tech companies, I would love to have more because I mean, some of these are very good businesses.

But then I also need to stay true to what my investing discipline and what my investing philosophy is. There aren't that many tech companies in my portfolio. Well, 10K, any closing words?

other than, of course, you should go follow 10kdiver on Twitter. And we will definitely link to that in the show notes. If these were opening words, I'd say, get a cup of coffee. But these are closing words. Oh, I meant to ask you, can you tell us real quick, when and how did you start having that be your trademark phrase? Okay, so that was something I stumbled on by accident. So I was just about to write my first thread and put it out. It was a thread on this topic called the Kelly Criterion.

The Kelly Criterion is a fairly involved mathematical subject. And so Twitter at the time, I felt that it wasn't, it may not be exactly the right medium for it because on Twitter, people like to just scroll through things. Here I was trying to tell people, okay, you can't just scroll through this. You need to spend some time here. Maybe spend five to 10 minutes on this topic, read it and

And then you may get something out of it. Sit down. The professor is about to spill some knowledge. Right. Exactly. Something like that. I wanted to find a nice way to convey this message. I thought get a cup of coffee conveys this nicely. You're going to be here a while. So

you know, make yourself comfortable and give me the next five minutes or 10 minutes of your time, however long it takes you to drink a coffee. And maybe at the end of it, you'll learn something. That's how I started. And then this particular thread, somehow I got very lucky, mostly because there was this guy. He's also a famous guy on FinTwit. His name is

His handle is Borrowed Ideas. MBI, yeah. Yeah, yeah, MBI. He retweeted this particular thread of mine. And that sort of set the snowball rolling as you will. This thread became very popular. And so I thought, okay, maybe there's something to this after all. Maybe I should write a thread every week.

And so next week, here I am again on Friday night or early Saturday morning thinking, okay, what should I write about this week? Okay, again, I have the same problem. I have to tell people that you're going to be here a while and so on. But the nice thing about computer scientists is a good computer scientist, the saying goes, never solves the same problem twice.

He solves the problem once. And then the next time he needs to solve the problem, he reuses the solution that he has already developed. And since I like to think of myself as a good computer scientist, I said, okay, I've already solved this problem last week. So let me just reuse the solution. And so I start this week's thread with get a cup of coffee.

And that sort of became my habit. Now, you know, there are plenty of people on Twitter writing threads. Everybody's telling everybody else to grab a cup of coffee. Well, I think probably the perfect place to leave this is the next chapter for 10K Diver, for the persona, is you need to have a podcast and

called Computer Scientists on Twitter getting coffee like the Seinfeld comedians and co-workers getting coffee. That is such a great idea. Or maybe FinTwit on Twitter getting coffee. Since you are the venture capitalist, what do you think that idea is worth? 100 million pre-money easy. I thought you might say that. All right, listeners, with that, huge thank you to 10K Diver. David.

I think that's it. Listeners, we'll see you next time. See you next time. Thank you so much for having me on.