Listen to the deep-dive discussion – Why The Author Broke His Own Rules (28:25 min)
There are two ways to play the investment game. In his book Finite and Infinite Games (1986), philosopher James P. Carse observed that there are two kinds of games: finite games, played to win, and infinite games, played to keep playing.
The Finite Game
Most investors play a finite game. They try to beat the market this quarter. They chase returns. They optimize for short-term performance. They measure themselves against benchmarks, against neighbors, against their own impatience.
In the finite game, volatility is the enemy. Drawdowns are failures. Selling is “taking profits.” Holding is “being stubborn.” Every decision is reactive, driven by price movements rather than business fundamentals.
The finite player eventually loses—not because of lack of skill, but because the game is designed to exhaust. The volatility tax erodes returns. The skewness of the market punishes stock picks. The non-ergodic math catches up. One bad sequence, one forced sale, one moment of panic—and decades of gains disappear.
The Infinite Game
This system is designed for the infinite game.
The goal is not to win any particular quarter or year. The goal is to stay in the game long enough for compounding to do its work.
In the infinite game, survival is the foundation, not the constraint. Volatility is harvested, not feared. Time is the competitive advantage. The destination is compounding; everything else is navigation.
The infinite player does not measure success by beating the S&P 500 this year. Success is measured by the question: Am I still in the game? Is my capital compounding?
The System in One Page
The Problem:
Most stocks fail (Bessembinder’s 4%/96%). Volatility erodes wealth (the invisible tax). The market is non-ergodic (path dependency, absorbing barriers).
The Foundation:
Survival is the prerequisite for compounding. Invert: avoid interruption, permanent loss, and ruin. The Barbell: secure survival to enable aggressive growth.
The Structure (4 Buckets):
| Bucket | Function | Allocation |
| Cash | Optionality | ~15% |
| Index | Darwinian survival | ~20% |
| Growth Selection | Wealth creation | ~50% |
| Amplifiers | Asymmetric acceleration | ~15% |
The Lenses (5 Calibrations):
Ergodicity: “Can I survive this?” Duration: “When does the cash arrive?” Power Law: “Am I exposed to the winners?” Harvesting: “Should I convert paper to real wealth?” Behavior: “Am I about to break the vase?”
The Selection:
Twin Engines (earnings growth + multiple expansion). The 15/15 Rule (ROE ~15–20%, aligned growth). Six Scenarios (identify true compounders vs. traps). The Christensen Filter (avoid self-liquidating strategies).
The Exceptions:
Five Criteria of Untouchability. Veto power over allocation for proven compounders. The hierarchy: Survival > Untouchability > Allocation > Harvesting.
The Confession
The reader who has reached this point now possesses a complete system. The buckets, the lenses, the selection criteria, the exceptions—every tool needed to play the infinite game.
It is not enough.
I know this because I designed every element of this system—and then, in a very short period of time, I violated nearly every rule in it.
Palantir rose over 1,200% in my portfolio. It was a Bucket 4 Amplifier—a position designed for one purpose: to capture the right tail and harvest aggressively. The system’s rules were explicit. Instead, I watched it as though it were a Compounder, convinced the narrative justified holding. IonQ surged to $80 on the quantum computing wave—another Amplifier delivering exactly the asymmetric spike the system was built to capture. I did not harvest. Rigetti, purchased at $3, followed the same pattern—a spectacular right tail event met with inaction. In each case, the Harvesting Lens was flashing red. In each case, I chose to believe the story over the system.
The spikes reversed. Palantir gave back hundreds of percentage points of unrealized gains. IonQ fell from $80 to below $40. Rigetti collapsed. Paper wealth—wealth that the system explicitly demanded I convert into real wealth—evaporated. Not because I lacked a framework, but because I did not apply it.
The cost was staggering. In a very short period of time, just after writing this book, I gave back more in unrealized gains than most investors accumulate in a decade. Miscategorization of assets. Failure to harvest. Failure to exploit convexity. Choosing to pay the invisible volatility tax rather than the visible capital gains tax—the precise error described in Chapter V. Failing to convert paper wealth into real wealth when the Harvesting Lens was flashing red. Failing to mechanically apply the rules of a system I had designed myself.
The biggest tuition fee ever paid for a course I had already written.
And yet—the same person who failed to harvest Amplifiers had, for over fifteen years, successfully held Compounders without interruption.
Microsoft, purchased in the early years of its cloud transformation, held through every correction, every “overvaluation” scare, every temptation to take profits. It compounded over 1,600%. Walmart, held for over a decade while the market dismissed it as a dinosaur being eaten by Amazon, compounded over 500%. Berkshire Hathaway, held through Buffett’s advancing age and endless “is Berkshire still relevant?” headlines, compounded over 350%. Not one of these positions was ever trimmed, optimized, or harvested.
These were Bucket 3 Compounders that satisfied the five criteria of Untouchability—and the system’s rule was clear: do not interrupt compounding. The discipline of inaction worked. Over fifteen years, the urge to “lock in profits” on a 200% gain, a 500% gain, a 1,000% gain was resisted every time. The Coffee Can remained sealed. The vase stayed on the shelf.
This is the paradox at the heart of this book. The same investor who mastered the discipline of inaction on Compounders failed catastrophically at the discipline of action on Amplifiers. The same mind that understood—deeply, intellectually, structurally—that a Bucket 4 asset must be harvested at the spike, could not execute the harvest when the moment arrived.
The system was not wrong. The application was incomplete.
This is not a confession of incompetence. It is a confession of humanity. The gap between knowing and doing is the widest gap in investing—wider than the gap between ignorance and knowledge. The Behavioral Lens is the fifth and final lens for a reason. It is the only one that cannot be mastered intellectually. The first four lenses—Ergodicity, Duration, Power Law, Harvesting—are analytical tools. They yield to study. The fifth is a war with oneself, and it is never won permanently.
The greatest risk to the reader of this book is not failing to understand the system. It is understanding it perfectly—and not applying it.
A framework without discipline is a vase on an unstable shelf—intact, admired, and waiting to fall.
The Invitation
This system is not a formula. It is a framework. The allocations are guidelines, not commandments. The criteria are filters, not scores. The exceptions require judgment, not mechanical application.
But the discipline is non-negotiable.
The system demands the courage to do nothing when a Compounder rises 1,600% and every instinct screams to take profits. It demands the courage to harvest aggressively when an Amplifier spikes 1,200% and the narrative whispers that it will go higher. It demands the courage to pay the visible tax to avoid the invisible one. It demands the courage to admit, after the fact, that you knew the right answer and chose the wrong one.
James Carse wrote that the finite player plays within boundaries. The infinite player plays with boundaries. The boundaries of this system—the buckets, the lenses, the hierarchy—are not constraints. They are the architecture of freedom. They exist so that the investor does not have to rely on willpower alone, because willpower, as those positions taught me, is not reliable.
The system provides structure. The compounding provides wealth. The discipline provides both.
The Final Word
Compounding is the closest thing to magic in finance. Small amounts, consistently grown, become fortunes. But the magic requires time—and time requires survival.
This system is designed to provide both.
Survive the math. Harvest the volatility. Let the compounders compound. Play the infinite game.
The destination is not a number. The destination is freedom—the freedom that comes from capital that works, year after year, decade after decade, while life is being lived.
That is what the system is for.
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Attributed to Albert Einstein
“The first rule of compounding: Never interrupt it unnecessarily.” — Charlie Munger
And the hardest rule of all: apply the system you built, especially when it hurts.
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