Compliment of the day: you are muy impresionante.
That means very impressive in Spanish. I’m writing to you from San Miguel de Allende, a quaint Mexican magic town. You read that right—it’s a pueblo magico, what the Mexican government designates for beautiful, traditional towns.
But isn’t traveling right now dangerous? Is Mexico dangerous? What about the Delta variant?
Fielding these questions from my Mom, and honestly, myself.
Luckily I picked up a book called An Economist Walks into a Brothel, which weaves compelling storytelling with an actionable framework for taking on risks (especially financial ones).
Today’s edition will cover these book highlights, as well as: Bitcoin Credit Card, Robinhood IPO, Hilton points and Eat Pray Love.
👠 An Economist Walks Into a Brothel
Allison Schrager is an economist who explored where risk is most extreme: sex work. She visited the (in)famous Bunny Ranch and discovered how the Vegas brothel made a killing: remove as much risk as possible for sex workers and their clients.
From this extreme example, Schrager draws parallels to everyday life—how much are we willing to pay to reduce risk? And is there a way to approach risk in an optimal way?
Her 3 step process for risk-taking:
1. Get clear on a goal. Without well-defined rewards, people are prone to taking unnecessary risks.
Example: Your goal is to make investments that beat the market.
2. Identify possible risk-free options. Can a goal be achieved with minimal, or even no risk? What would guarantee that you would accomplish your goal?
Example: Compared to the stock market thataverages a 10% annual return over the long term, you can get a risk-free option with less reward now, like treasury bonds that pay 3.54%.
3. Is that no-risk option possible or desirable? If not, decide how much risk you need to take to get what you want.
Example: 3.54% returns bore you – you want to beat the market. Then you have a stronger basis to take risks like investing a portion of your money in crypto.
I like this goal-oriented approach to finance. Having clear goals can help prevent impulsive decisions, YOLO and regret. At a minimum it answers the question: What game am I playing here?
Big takeaway: “A risk is more likely to work out if you are seeking a reward you actually want. It sounds so obvious, but we often take risks just because we want change. And when we do that, we often lose, no matter what happens.”
Read along with me: Grab the book and reply to me with your favorite takeaways.
💳 BlockFi’s Bitcoin Credit Card
If you’re unsure about crypto, here’s a risk-free approach to get invested: use a credit card that pays you back in free Bitcoin rewards.
I got the new BlockFi “Bitcoin back” card, which pays out 3.5% in Bitcoin on your spending in the first 3 months, then 1.5% on all purchases after.
Here’s why this is an almost risk-free crypto decision:
- This is a Visa card with $0 annual fee
- You get a referral bonus of $10 in BTC just for opening your account with a $100 balance.
- On top of all that, any Bitcoin sitting in your account will earn up to 4% interest.
BlockFi is literally bending over backwards to de-risk cryptocurrency for the average consumer. It’s just free crypto on free crypto. I don’t work for them – I’ve just been a fan of their high interest account for a while now.
Investing note: using a Bitcoin-back credit card leverages the power of dollar cost averaging – investing over time instead of trying to time the market for one big purchase. Products like this create an upward pressure on the price by naturally increasing the demand for Bitcoin. IMO this is a bullish signal.
🏹 Getting in on the Robinhood IPO
There’s no company more influential than Robinhood for ushering in a wave of retail investing.
I remember opening my Robinhood account in 2015. Even then, I was blown away by how great the user experience was: slick design, easy to use, and most importantly—free stock trading. This has revolutionized trading so much that dominant players like ETrade and Schwab have followed suit to offer commission-free trading.
Robinhood offered its customers the ability to reserve $HOOD shares between $38-42 via its IPO access feature. It had a rocky debut, dropping ~10% to around $35/share.
My first worry: Robinhood didn’t shake its January scandal when it halted trading of meme stocks like Gamestop. It could also be investor’s inflation fears, or that this was a particularly competitive IPO summers.
Then a dramatic reversal. $HOOD itself became a meme stock and popped to $56/share at a market cap of $44 billion.
If you’re a long term investor, short term price fluctuations don’t matter. Here’s why I’m bullish on Robinhood over the next 5-10 years:
- Disruptive company: not afraid to innovate in their product, design, and new features to empower investors. I believe their innovation will continue to outpace their missteps—and competitors.
- Loyalty customer base of 18 million customers with an average age of 31. They’ve earned the trust of millions of new investors – all they have to do is not fuck up to continue accruing an increasing share of their users’ money as they age.
- Room for growth: I think Robinhood has the potential to become a $100B+ company. It’s ~$40B right now.
A sign of confidence: famed investor Cathie Wood scooped up $45 million worth of Robinhood shares.
What do you think of Robinhood’s stock over the long term? If this past year’s events haven’t turned you off from the company (or you just don’t pay attention to news—good for you), then you should consider joining. You can get a free stock just for signing up for free.
💰 Money tip: Hilton points go quite far in Mexico
Outside the U.S., hotel points can stretch much further than their U.S .counterparts. For example:
- Los Angeles Hampton Inn (low end hotel): 60,000 points/night
- Guadalajara Doubletree (higher end): 18,000 points/night
That’s 3x less points to stay in a nice hotel in the center of a foreign city versus a mediocre location in LA. If you’re traveling abroad and want to switch things up from the AirBnB experience, definitely check out how many points this all costs.
To sweeten the pot, with certain cards like the Hilton Aspire you can get the 5th night free.
🇲🇽 More about my Mexican Eat Pray Love trip
Travel creates serendipity, like this conversation with a fellow traveler:
Me: “When would you travel to if you had a time mach—”
Her: “But I am a time machine.”
Travel forces change and discomfort, as well as reflection and adaptation. It puts me out of my depth so I can explore things in depth.
Unlike the frenzied travel of my 20s, I’m working in 1 place remotely. This allows me to balance the novelty of travel with the stability of a creative space. By day I’ll write and define the next season of creative work. By night I’ll take dance classes and explore the city with friends who’re also in town.
The most important part of this trip isn’t the destination itself, but the process at which I arrived at allowing myself to travel and create adventure again. (Note to self: Don’t wait for anyone to bring the fun. You gotta learn how to create fun in your own life.)
This theme of lifestyle design is something I want to further explore in writing, and how designing our finances can help create the desired life.
If you’re interested in this, vote by replying: “Life design” to this email.
Gracias!