This week, I listened to investor Alix Pasquet III share his simple process for learning new investing skills:

1. Imitate – Find the smartest people who’ve figured out what you’re trying to do. Watch how they do it and imitate them. You’re trying to understand and replicate the what.
2. Assimilate – Analyze what they’re doing to understand why it works so well. The why is what you want to understand.
3. Innovate – Improve upon what you’ve learned. Make it better by adding your own insights or twist.

That’s a pretty straightforward process. I like it because you’re not trying to reinvent the wheel. You’re building upon what others have already figured out, which saves a ton of time.

Imitate, assimilate, innovate. That’s the way to learn and build new skills.

Another thing I learned at the weekly AI sessions hosted by Georgia Tech was the capabilities of an AI tool I’d heard of but overlooked: Manus. It has agentic capabilities like Claude and ChatGPT, and it’s so good that Mark Zuckerberg bought the company for $2 billion last December (see here). The deal closed, and Manus became part of Meta. But the story has more twists and turns. On April 27, 2026, the Chinese government ordered Meta to unwind the acquisition (see here). It’s basically forcing Meta to accept a refund for the purchase price of Manus. We’ll see how that plays out.

Last night, I got to see how an AI engineer who knows Manus well uses it. He showed us what he’d created with Manus and how he uses it daily. I was impressed. Comparing it to Claude, I noticed a big difference. Claude has various products that can do different things, like Claude Design. Manus can do the same things, as far as I can tell, but the capabilities are all within the single Manus product.

I walked away with a better understanding of why Zuckerberg bought the company so quickly, and I’m looking forward to playing with Manus myself.

I was listening to a podcast today. An entrepreneur shared a quote that got me thinking:

Pessimists sound smart, but optimists get rich.

I’m not sure who said this originally, but I think it’s a great quote for entrepreneurs and investors to keep in mind. A disposition that considers the worst things that could happen or the potentially negative outcomes is valuable because it keeps the What could go wrong? and What risk am I taking on? questions top of mind. Managing downside risk is critical to surviving long enough to get lucky as an entrepreneur or investor, and you can’t survive if you’ve taken on more risk than you realize.

But being mostly pessimistic severely limits you, because you constantly think that things won’t turn out well. Surprise, surprise, when you think like that, things don’t turn out well. It’s a self-fulfilling prophecy.

The most successful entrepreneurs and investors I know are neither wholly optimistic nor wholly pessimistic: they’re about 80/20. They’re optimists 80% of the time, but 20% of the time they’re thinking about the downside to make sure they’re not going to do something that takes them out of the game permanently.

One thing I do periodically is read the SEC filings of publicly traded companies that are about to go public. The SEC requires them to file an S-1, a comprehensive document that details everything about the company: financials, ownership percentages, risk factors, etc. With it, anyone considering buying shares when the company begins trading on a public stock market can make an informed decision.

SpaceX is planning to IPO next month, and this week, they filed their S-1. The rumor is that the company is aiming for a market cap (i.e., valuation) of between 1 and 2 trillion dollars, which would make it one of the largest publicly traded companies in the world. That’s a big number, and I’m curious to understand the company to figure out whether this valuation makes sense. So, my goal is to carve out some time to read the S-1.

If you’re interested in reading the S-1 yourself, you can find it on the SEC’s website here.

An eye-opening thing I’ve been thinking about recently is hit rate. In the context of investing, your hit rate is how often an investing idea or decision is correct. The concept isn’t new to me, but a book I read recently, Stock Market Maestros, contains a surprising stat. Using years of historical buy-and-sell data and a top-notch analytics platform, the authors established that the best stock market investors, who have gigantic returns, are right only about 50% of the time.

This got me thinking about my entrepreneurial decision-making hit rate. When I was running my company, I never measured my hit rate. But if someone had asked, I confidently would have proclaimed it was probably 70% to 80%. Reading this book humbled me, and I know that statement would be false. I’m pretty sure it was more like 40% to 49%. Maybe 50% at best. What I now realize is that as an entrepreneur, I was wrong a lot, and that’s normal, even for the most successful people.

I now think about decisions I make as having a higher probability of being wrong than I realize. That change has made me more open to alternative decisions and their higher probability of being right than I might naturally think. I also spend time thinking about the payoff ratio, also known as magnitude. What’s the magnitude of the consequences of a decision, right or wrong?

I think that hearing about this 50% hit rate is making me more flexible mentally, which I hope improves my decision-making.

Following up on my stock-based compensation (SBC) post from yesterday, I did some digging into a few companies based on what Kevin Koharki shared in his interview last week. As of today, I don’t think SBC is a bad thing; it just isn’t well understood. I view it as a tool, and the impact it has on a company’s shareholders (negative or positive) is determined by how management uses the tool.

We’re moving into an era when technology companies are shifting from asset light and cash rich to capex heavy and possibly strapped for cash. The cash-generation abilities of public tech companies will be scrutinized more closely going forward. After looking at the impact that SBC and related buybacks can have on the “true” free cash flow of a company, I suspect that evaluating SBC’s impact will become an important part of how companies are valued.

I’m working on my own framework, which I’ll use going forward. It will leverage what Koharki shared and also incorporate other variables that determine the per-share economic impact of SBC on shareholders. Hopefully I’ll have something I can get feedback on within the next few days.

Last week, I listened to an interview with Kevin Koharki. The topic was something I’ve been thinking about for over a year: how does stock-based compensation (SBC) impact shareholders of public companies? When I review the financial statements of public technology companies, I see that they have large amounts of SBC expense, but it’s a noncash expense. So, many people back it out and focus on cash flow from operations, free cash flow, or adjusted EBITDA. But that SBC must be paid to employees in cash at some point (assuming the stock performs well), so how is it accounted for?

I’ve leaned toward using diluted share count instead of shares outstanding when calculating free cash flow or potential free cash flow per share. But Kevin thoroughly explained how SBC materially reduces operating and free cash flow of companies that offset SBC dilution by repurchasing shares (i.e., doing buybacks). He does a great job of walking through a real-life example of a company and showing where on the financial statements you can find the information you need to determine how SBC affects cash flow per share. The biggest thing I learned from Kevin was that in some companies, shareholders get hit twice: when companies issue SBC and when they do buybacks. And that second hit isn’t accounted for on the income statement or cash flow from operations. I hadn’t considered this, but when he walked through it, it made a lot of sense.

Kevin is spot on, but I will say that two assumptions underpin the worst-case scenario in his argument. He assumes the stock price will be higher when employees cash in their SBC and the company repurchases shares. That’s been true the last few years, but historically it isn’t always true. The stock market has long periods of underperformance (e.g., 1964–1981). Companies can’t control the prices at which employees sell shares, but they have total control over the price they pay to buy back shares. The smartest CEOs repurchase shares only when the stock is suppressed because the stock is likely trading for less than it’s worth, meaning the returns on buybacks are often higher than capital allocation alternatives. Henry Singleton mastered this, and it’s a big part of why Warren Buffett praised him and why Teledyne’s shares outperformed (learn more here). If a company repurchases shares at materially lower prices than when SBC was issued and doesn’t issue additional SBC to employees to compensate for the lower stock price, it’s likely a benefit to the company. Those are two big ifs, though, especially the second one.

The second assumption is that companies that issue SBC are buying back shares to offset the dilution created by SBC. That’s true of many companies, but not all. Some companies don't repurchase shares. Instead, they focus on minimizing share dilution by limiting share count growth to a low single-digit percentage each year and improving the underlying fundamentals of the business. One company I track increases share count by 2% to 3% a year via SBC, but it’s growing top-line revenue, operating cash flow, and free cash flow at 30% or more annually. The company hasn’t repurchased any shares to date. Thus, the business fundamentals are increasing at a rate that far outpaces the share dilution from SBC. Said differently, the intrinsic value of the company is growing at over 30% annually, while shareholders are being diluted roughly 3% annually. It’s true that 3% dilution means investors own 3% less of the pie each year, but that’s not as much of an issue when the pie is 30% larger each year.

I think Kevin is on to something and that more people will start to pay closer attention to this in 2026. Anyone interested in how SBC works or how it impacts shareholders should consider watching Kevin’s interview here.

Earlier this week, a jury found Meta and Google negligent in operating their products in a way that harms kids and teenagers. Both companies will most certainly appeal, but the verdicts have already reverberated through the press. I don’t use any of Meta’s products (Instagram, Facebook, etc.), but I do listen to Google’s YouTube regularly, so this case caught my attention.

I’ve always thought these platforms are protected because they’re not creating the content and aren’t the publishers. They merely provide a place for publishers to post content and for users to consume it. Given this verdict, I need to learn more about this case, what the jury found these companies liable for, and why the judge allowed it to proceed.

I’m not sure what the ramifications of this case will be, but I suspect it will have an impact on sites hosting third-party content. I’m curious to see how this plays out.

This week, I had a thesis on a publicly traded company that I wanted to think through and research. I fired up Claude (not Cowork) and started laying out my thinking. I included references to public filings with the SEC and past events in the industry in which this company operates. Claude was a great thinking partner; it helped me crystallize my thoughts. It was especially helpful in going out to the SEC website and digging through tons of filings to verify details that I knew were roughly accurate but that I wanted to be precise about.

After I was done sparring with Claude about the thesis on this company, I instructed it to act as if it were a seasoned analyst and create a report that summarized what we concluded with supporting facts and figures. The output was a 10-page report that was very impressive. I did have to read it and make Claude clarify and adjust several things, but it made the adjustments with no problem. I sent a copy of the report to a friend, and he was blown away.

Creating that kind of report would normally take several days. Between thinking, researching, and drafting the report, it’s a ton of work. I’d probably need someone to help me with it. But I was able to go from a hypothesis to a report with probability-weighted scenarios supported by facts in less than a day. This is helpful because I can quickly create something that helps me improve my thinking. Documenting my thinking and sharing it with others for feedback, and storing it for later reflection after the situation has played out, is easier than it’s ever been.

I don’t want AI to think for me, but it’s a great tool for accelerating my thinking and analyzing so I can reach the right conclusion faster. And it does a great job of organizing and presenting my thinking in a document incredibly quickly.

Today I was looking at my decision journal and the post I wrote about it (see here). Just looking at the journal made me see a recent decision more rationally. It was a small decision, not worthy of being recorded in my journal. But thinking about how I would describe it if I did write about it in the journal helped me think about it more clearly and quickly conclude it wasn’t the greatest decision.

I think that knowing I have a decision journal forces my brain to think more rationally. I guess physically seeing the journal may activate certain frameworks around decision-making. Not totally sure of this yet, but something I’m definitely watching.