Why Invest or Speculate

You might wonder why one of the first few blog posts I’m writing is on investing rather than Quantum Mechanics, Group Theory, or one of my GitHub projects. The summer before college, I decided to dabble in crypto and stocks out of sheer greed and boredom. While the degenerate crypto bro inside me died long ago, some things stuck around. Investing — with occasional speculation — became one of my favorite hobbies and one I have the fondest memories of. (Poker’s a story for another time.)

Now, every time I read a newspaper headline or come across a new product I like, the relevant stock is the first thing that comes to mind. I'll get into my analysis and stock theses in future posts, but for now, here are my thoughts on why everyone should invest and speculate in equities.

Before diving head-over-heels into financial statements, stock tickers, Bloomberg terminals, analyst reports, or WallStreetBets, let’s take a step back from the noise to ponder what greater good comes from it all.

I believe the reason is much deeper than just the pursuit of money or passive income — despite what countless online financial gurus might have you believe.

If one aspires to economic or material prosperity, it’s clear they subscribe to the ideals of capitalism and seek their place in a market economy. The easiest way to understand how to succeed in capitalism is to understand how to fail in socialism.

Reading the synopsis of Das Kapital or a basic “Marx 101” will teach you that Marx despised the idea that enduring wealth resides with those who own the means of production — that is, the assets and enterprises that generate income and control labor. In any successful market economy, this remains highly relevant. Wage labor can provide financial security, but it is the ownership of productive assets that enables individuals to accumulate significant wealth and exercise economic influence.

Therefore, to move beyond the limitations of wage dependency and participate fully in capitalism’s wealth-generating engine, it’s essential to invest in and own the means of production.

Of course, this is easier said than done — it's almost like saying, “If they have no bread, let them eat cake.”

This is where stock markets emerge as a theoretical level playing field. Now, almost anyone can own a fraction of some of the most innovative and robust businesses with even the most inconsequential amounts of money. However, for the uninformed and the un-equanimous, the financial markets can exacerbate inequality — transferring wealth from the retail investor to the math Olympiad medalist quant working for a market-making firm.

First Principles Thinking

One reason why countless STEM students end up in the financial markets is their aptitude for first principles thinking.

After reading up on several prominent investors and traders, I realized that many had a STEM education. Charlie Munger studied physics in college. Edward Thorp, Jim Simons, and Nassim Taleb were mathematicians. George Soros studied philosophy with an emphasis on the theory of knowledge.

But it’s not that straightforward.

Isaac Newton, one of the greatest minds that ever lived, staked his fortune on the South Sea Company in 1720 and lost heavily after cashing out on early gains. He famously said, “I can calculate the motions of heavenly bodies, but not the madness of the people.” Richard Feynman put it similarly: “Physics would be more difficult if electrons had feelings.”

That is precisely the challenge that financial markets present.

The best way to avoid being swept up by overly optimistic or pessimistic crowds is to think from first principles. If two people are arguing over whether it’s sunny or pouring outside, the best move isn’t to pick a side — it’s to look out the window yourself.

As Benjamin Graham famously remarked:

“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

Just like the U.S. presidential elections, a viral campaign might charm and sway the electorate, but the true test of a candidate’s capabilities is reflected through long-term approval and re-election.

Some of my best investments didn’t come recommended by friends, family, analysts, Seeking Alpha, or even Nancy Pelosi. They were companies whose businesses I understood. Their financials were healthy, and I could easily make a case for their revenue and earnings to grow.

This style of investing — going long — has served me well. Unlike trading, which is a zero-sum game, long-term investing doesn’t pit you directly against a quant fund or a Bloomberg terminal. Trading alpha is zero-sum and it’s unlikely that a retail investor can outperform high-frequency firms with low-latency execution or access to block deals and special financial products.

I've always found it easier to build a case for a company's earnings to grow over time than to predict oil prices or interest rates. But to each their own.

One of the best heuristics I ever heard came from an old man I overheard at my country club in India. He said:

“I wouldn’t buy a stock without researching the business — even if God recommended buying it!”

Conclusion and Golden Rules

I just realized I’ve yapped a little too much for a single blog post — regurgitating quotes and simultaneously preaching first principles thinking is a little hypocritical, I know.

But I believe investing is a valuable intellectual exercise — one that might also reward you financially. Here are a few rules I try to follow to approach the markets with equanimity and conviction:

Key Rules

Never buy a stock based on anyone’s word. Not even Buffett knows whether a stock will go up, down, or sideways.
Stay wary of the three L’s: Ladies, Liquor, Leverage. (Solid advice for life — not just the markets.)
Think for yourself. Be greedy when others are fearful and fearful when others are greedy. The news will try to convince you the world is ending at least once a month.

None of the above is financial advice — always do your own research (at least until I pass the Series 65 exam lol). Now, excuse me while I check on stocks in India before going to bed.

Thanks for reading till the end — stay tuned for specific stock ideas (first principles thinking, of course).