1/ We have already considered some protocols with their own systems for maintaining token values at the $1 peg. Let’s look at @fraxfinance and speak about the price stability of its token.

The payments wars in Japan are heating up and one of the battlegrounds is convenience store coffee.

“Coffee? What does that have to do with payments?” I’m glad you asked.

Convenience stores are low net margin businesses, which sell some high gross margin goods/services but a lot of low ones, and have high fixed costs and a low ticket size. The typical transaction is under 500 yen ($5) and many are about $1.

They need repeat custom.

A few years ago, all of the chains had a good idea for increasing frequency of use: make a minor capital investment in automatic coffee machines. Sell access to them for the price of a cup / ice; customers self-serve with the machine.

The price point is $1 to about $2.

Coffee quickly became one of the most frequently repurchased items at convenience stores, in no small part because it’s the one thing they can sell which is phameceutically habit forming but totally unregulated. (Just telling it like it is.)

But the coffee is not very defensible

The problem, such that it is, is that competing chains are everywhere and *all* of them serve Thoroughly Adequate Coffee at similar prices, so you’re back into the brutal economics of “Who is 3 meters closer to 40 customers at 1 office?”

Enter payment apps.

1/ Peter Bevelin, who has written books like “Seeking Wisdom: From Darwin to Munger,” provided me with a rough transcript of the Charlie Munger talk from yesterday. I did some clean up and editing and focus on points I didn’t make in my tweets yesterday.

2/ “All successful investment involves trying to get into something where it's worth more than you're paying. That's what successful investment is. There are a lot of different ways to find something worth more than you're paying. You can do what Sequoia does [e.g, in VC]."

3/ “Good investing requires a weird combination of patience and aggression and not many people have it. It also requires a big amount of self-awareness about how much you know and how much you don't know. You have to know the edge of your own competency."

4/ "A lot of brilliant people are no good knowing the edge of their own competency. They think they're way smarter than they are. Of course, that's dangerous and causes trouble.” Charlie Munger

5/ “When I was young, there was practically nobody involved in investing and they weren't very smart. Now almost everybody's smart. A good proportion of the people in investing are sucked into finance by the money. That's an important development. I don't welcome it at all."

This is value investor, Allan Mecham.

He dropped out of college at age 22 to start his fund, Arlington Value.

From 2008-2016, they did a CAGR of 30% over 8.5 years!

And in his fund letters, he shared his best frameworks for investing in companies.

Here's a breakdown of each:

1. Adopt a mindset for longevity

He focuses on variables that affect a business' durability.

Stuff like valuation doesn't matter if the business quality is misjudged.

Since a company's value is determined by its future cash flows...

Hence evaluating its future is key

2. Stay within your circle of competence

Allan is aware that his CoC is tiny!

Thus, he rarely buys companies that he:

• Hasn't researched
• Hasn't followed for at least a few years.

Because the best way to study a business is to observe its execution overtime.

3. Embrace volatility as a gift

Public markets offer you amazing deals you will never get in the private markets!

It's all about being patient.

The underlying value of a business is much more stable than the stock.

So you can buy great businesses that are mispriced!

4. Avoid noise and news

More information can give you a false sense of confidence.

It can create an illusion of "knowledge", and make you think many things are important.

The key is to know what are the 3-5 main variables in the company, and focus on those.

Ignore the rest.