“As I’ve indicated earlier, the riskiest thing in the world is the belief that there’s no risk. By the same token, the safest (and most rewarding) time to buy usually comes when everyone is convinced there’s no hope.”

Howard Marks – Mastering the Market Cycle

Money. Most view it as a means to an end, both an enemy, and a friend. And as we spend, we feel the anxiety of loss, and the constant battle to earn more. Money is a game of comparison, dominance, and power. And by that same token, a sign of weakness.

It is jealousy and lust, greed and mistrust.

When I was younger I vowed to never let money control my life. Rather than worrying about how much I had, where it would get me, or would I retire, I chose to spend the time I had developing myself and my skills. By focusing on myself and building things that bring value to the world, I believed money would come.

But as I’ve studied money and markets, I’ve come to appreciate it in a new way. We buy new things to feel excitement, we purchase adventures to feel a rush, and we use money to build better relationships so we can feel connection.

Money spent is the representation of human emotions. What we value, who we support, our purpose: money is a vote on what matters to us.

When you look at the aggregate of people’s emotions and values, you get the financial markets. If you were to look at an index chart, you’d see the swings in the pendulum and the unpredictability of ups and downs.

There is no rationality here. There is no cold, calculated mathematics that determine whether the stock market goes up or down; all of this is raw human emotions.

A new bill was passed, someone tweeted, the Federal Reserve hiked interest rates, a pandemic hit, there’s government stimulus, an oil spill occurred off the coast, a war is imminent.

These events create emotions. People get excited and buy and the markets increase. Or they get scared and sell and the markets drop. It is these cycles of buying and selling, booms and busts, bubbles and bursts that create cyclicality that is the financial markets.

In the housing bubble of 2007, the dotcom bubble of 2000, and the post-COVID bubble of 2021: we saw large periods of excitement where positive sentiment quickly turned to irrational exuberance. Shouts that the market will increase forever, get rich quick schemes sprout like weeds all over Youtube and Twitter with people flexing expensive Lamborghinis and their million dollar houses.

And we get jealous. And we get lustful. And we want in, so we buy.

It happened with internet stocks in 2000, it happened with real estate in 2007, and it happened with Crypto in 2021.

And then the crash happens, and sentiment turns to doom, and then it turns to gloom: and we think everything will be lost, and will always be lost. Shouts of blood in the street reverberate through the magazines headlines and news articles. Panic onsets.

It’s this emotional rollercoaster that leads to the mass buying and selling that underpin any financial cycle. But more importantly, these cycles detail one clear and fundamental law of the human condition: When times are good we believe it will go on forever, and when times are bad, we believe everything will be lost forever.

On the contrary it’s the very nature of cyclicality that busts lead to booms just as much as the booms lead to busts. And as Howard Marks detailed, when everyone is convinced there is no hope, that’s the exact time to have hope. This is the only sure way to win the game of human emotion.

I find it rewarding when multiple disciplines converge on the same thesis because it’s a signal of a foundational principle. This cyclicality of markets draws on anti-fragility, cognitive behavioral therapy, and Ray Dalio’s Principles. 

Anti-fragility in that the human condition is one in which our lowest points take us to our next highs. It is struggle that creates growth. And by that same principle, the lack of struggle create weakness and lead to our falls.

Cognitive Behavioral Therapy teaches about emotional reasoning, a cognitive distortion. When we make decisions based on our emotions, it distorts how important a factor might play. For example, in a poker game I might feel so strongly that I have the best hand, and so I push all in, when in reality another player is carrying pocket aces.

Playing the markets is a lot like playing poker. Many of us play based off of strong feelings of desire, hope, and excitement, but the best actors are the ones that learn to control and play based on a set of rules.

And that leads us to Ray Dalio’s Principles. A principled life is the only sure way to be able to master the game of human emotions. That is, we must create a set of rules that dictate what we do and when we do it. Outsource your decision making to a rule, and revisit the rule periodically to learn if it’s working or not.

In the markets create a rule on what you will buy and when. In the mornings create a rule that dictates you will get up and go to the gym. In a fight with your significant other create a rule that you will breathe, then think before you speak. 

It might sound cold and rational, but principled living is not about suppressing emotions. Rather it’s the highest form of honoring and accepting emotions. In order to truly overcome emotions, we can’t bury them nor can we wear them like so many do.

We need to accept them, release them, and then carry on with our lives. A rule. It’s the only sure way to escape the emotional rollercoaster, not just in the markets.

Who would’ve thought that money could teach that?

“When you extend your exhale by one to two counts longer than your inhale and you practice this for a couple of minutes, your heart rate will slow down. This sends a feedback message to the brain saying that everything is more peaceful and calm than it was a few minutes ago”

Ashley Neese, How to Breathe: 25 Simple Practices for Calm, Joy and Resilience

On a long car ride back from my parents’ home in Cleveland, Ohio to Raleigh, North Carolina, my girlfriend started wiping away streaks of tears from her eyes. I asked what’s wrong but she couldn’t explain—she only knew that she was stressed and upset and thought it was something related to her career not heading in the right direction.

Immediately I started going into problem solving mode: what are you trying to do with your career? Who do you want to be? What are your goals and aspirations? How are you thinking about it?

She snapped at me, stop.

I felt hurt and wronged, because I was only trying to help, so I turned up my sad music playlist and we sat there for a while, just listening to the music.

It was in that moment I learned a valuable lesson: logical problems need logical solutions and emotional problems need emotional solutions. But logical solutions cannot solve emotional problems.

In other words, you can’t think your way through depression; you can’t think your way through hurt or pain; you can’t think your way through anger or frustration.

In the self-development industry there is by far an over emphasis on mindset.

Reframe how you think! How is the worst thing that happened to you actually the best thing? What is the story you’re telling yourself and how can you change it?

Don’t get me wrong, these are powerful tools, but they ignore a large part of the self-development equation: how do you control how you feel?

The email from the rude coworker, the feeling you get when you need to go to work, and the sneer your significant other gave you when you told them something important—these all elicit small emotional responses that will, in someway, shape our behaviors and decisions over the course of our weeks.

So many of us choose to bottle these up. We might apply some mindset principles and ‘reframe’ them. But it continues to bottle up, and bottle up, until it lets implodes in an emotional release: a tear down the eye in a long car ride.

Emotions and emotional release has become a major topic of my reading, because of how crucial emotions are in our day to day lives.

This is how I found breathwork.

The breath is particularly interesting as an emotional solution because it is always with us no matter what situation we are in.

Breathing is our connection with our lifeforce. It’s the ease and swell of the wave by the ocean. The calm that keeps on calming.

Scientifically, breathing can change our brain state from the sympathetic (ANS) to the parasympathetic (PNS) and vice versa. In other words, we can choose to move our brains from flight and fight to rest and digest at will.

As Ashley Neese, a breathing expert, claims: when we exhale longer than we inhale, we’re actually able to slow our heart rate down. This signals to the brain that we’re in a state of calm, even if we were just recently emotionally triggered by a text or email.

She goes on, “Anxiety and stress cannot live in the body if you consciously slow down your breathing, because they require a cycle of fast and shallow breathing.”

In any moment, we can choose to be stressed or not. When we’re cut off by that driver, or lose a game of poker, we can choose whether we want to initiate rage or calm down.

In my experience, breathing is a great calming tool: it helps us separate from our emotions and bring some space where we can begin processing through the emotion.

From this point forward, I’m going to offer my own theory of emotions but none of this has been validated or substantiated by researched professionals; so take it as you will.

I believe there to be four phases to overcoming emotions:

1. Shift from ANS to PNS
2. Acceptance
3. Processing
4. Forgiveness

We’ve already discussed the shift from ANS to PNS by using breathing techniques, but I don’t believe that to be full the full solution to the emotional puzzle.

Instead I think three more steps are required to overcome and understand viral or subtle emotions.

The second phase is acceptance.

Put simply: it’s too easy to calm down from an emotion without understanding what we were feeling.

By only calming via breathing, our emotions still will get bottled up unless we work through them. Simply stating the feeling we had (i.e. I’m angry) allows us to attention to the state we were in without skipping past it.

The next step is to process through the emotion.

That means to work through it—for me that means journaling, for others it’s talking to a friend, a long car ride, or a walk. Whatever helps us think through the events, why we were triggered, and how we responded.

The final phase is forgiveness. Sometimes this may mean forgiving the people that caused you this emotion. For me, most of the time this means forgiving myself for feeling how I did.

This phase is about coming to terms with our emotion. We need to forgive ourselves for being reactionary creatures—it’s in our nature.

On top of that, our individual realities are real—two people may view the same event and have different emotional responses, but that doesn’t mean one was wrong for how they felt.

We have a right for feeling how we felt, and no one can take that away.

If there’s one thought I hope you take with you from this post, it’s this: emotions are a key part of the self-development puzzle, and it’s too easy to ignore them.

Don’t only listen to your thoughts and self-talk; take a step back and, for a few seconds, notice how you feel.

“Every action you take is a vote for the type of person you wish to become. No single instance will transform your beliefs, but as the votes build up, so does the evidence of your new identity.”

James Clear, Atomic Habits

Two years ago, I found myself struggling with depression. For me, depression was a paradox of having everything I could ever want all the while feeling like a failure.

I had a great career, I was debt free, I was pursuing the hobbies of my dreams, but I could never shake the voice that told me I was underachieving.

When I was a kid, I had always been told I was destined for greatness, but when I looked around, all I saw was mediocrity.

The battle between knowing and believing was raging in a full-scale assault. I knew what I knew, but I felt what I felt, and that was the great depression.

Belief is the voice in our bodies that talks to us with emotions. It’s why we get angry when someone says Trump or Biden, it’s the resignation after indignation, the secret obsession that causes our depression.

Beliefs are particularly troublesome because they are rarely consciously formed—they’re learned from the day we scraped our knee at the playground, the way Dad yelled at the waitress, and how Mrs. Gerard scolded us for missing the homework assignment.

Our friends, our families, our culture—unknowingly, it all shapes. Our synaptic neurons fire on all cylinders when it notices our closest friends hang out in the library instead of the gym, or how we struggle to look a girl in the eyes during conversation.

We place ourselves in boxes, we tell ourselves stories, we create an identity so that we can make some sense of the world. And for most of our young lives, that identity serves us. It shapes our decisions, our hopes, and our dreams.

But one day—when we’re 25 or maybe 45—we realize those beliefs we forged in our formative years do not help us or serve us or simply stand by as onlookers. 

They hold us back.

It’s on this fateful day that the boxes in which we categorized our lives come crumbling down and the stories we told become echo chambers that repeat, and repeat, and repeat. We know our belief is limiting, but there is a whole life worth of evidence to prove it.

On that day, an important question arises: how do we change our beliefs?

Contrary to popular belief, changing beliefs is not about achieving. For someone with the limiting belief that they cannot confidently socialize, they will not find their belief changed by managing to have a few great social interactions.

For me, who struggled with underperformance, suddenly getting a big promotion would not change my belief; even worse so, it would most likely make me feel like I did not deserve the promotion in the first place.

Achievement is the great fallacy we tell ourselves—if we get the girl, if we get the house, if we get the six pack, then we’ll be happy.

It’s not true, and the evidence to the contrary is quite significant so I won’t hound the point.

The true path to changing beliefs starts with choosing an identity—most people never choose who they want to become. Their identity is handed to them by the world around them. They were told they were one way and they follow that to the grave.

But if you had the power to choose any identity you wanted, imagine the person you could become?

How about changing your identity from a chronic TV-watcher and couch-sitter, to that of an active, healthy person? What kind of shift would that make in your life?

Or from a sad, underperformer to a constant learner and a positive hopeful? A shy, awkward type to a confident unashamed life of the party? A poor wage worker to a grinding entrepreneur?

We all have visions for who we want to become, but instead of focusing on the who, we laser on the what.

The difference is subtle, yet significant: choosing our who offers us a guiding light to transform our identity; choosing our what tells us we’re a failure as long as we don’t have the end result.

For example, every time we have the option to get up in the morning—what would the active, healthy person do? What would they wear? How would they approach their mornings and their days? How would they interact with other people?

Being the kind of person that is active and healthy is much more than just working out and having a six pack. An active, healthy person wakes up before the sun rises, they dress well and open their days with a smoothie bursting with antioxidants. They track their calories, especially their protein intake. They take the stairs instead of the elevator. And of course, when given the opportunity, they workout once a day.

As James Clear explains, each of these small actions we take cast a vote towards our identity. When we can’t wake up on time, that reinforces the story of a lazy person. But when we pop out of bed at 6 AM, that reinforces the story of an active, healthy person.

Changing our beliefs starts with the actions we take—from the way we dress and the accessories we use, to how we interact and show up over the course of a day.

When you have a whole lifetime of evidence to change, it takes time to change your beliefs in yourself, but not as long as you might think. For me, it took about a year before I fully bought into my self-belief of a constant learner and positive hopeful.

Identities and beliefs absolutely can be shaped, molded, and perfected, but it’s in the small decisions we take over the course of the day.

Every micro-decision, every branch in the road, and every regret tell our stories. And our stories are the only things that will be left behind when we pass.  

Don’t let your story be told for you—choose to own it.

“Don’t walk into a place like you wanna buy it, walk in like you own it.”

Matthew McConaughey, Greenlights

If there’s one thing I learned from reading Greenlights it’s damn, that guy had a lot of confidence.

Whether it was following his wet dream to Africa or committing to being a vegetarian without knowing what vegetarian even meant, he was always walking into the place like he owned it.

Matthew’s confidence can best be summed when he was a nobody and wanted desperately to play the leading role for a movie; he looked the director dead in the eyes and said, “That role should be mine.”

Greenlight.

I listened to the audiobook as I drove from Cleveland to Raleigh—by the end it was as if I had taken a road trip with an old friend.

McConaughey’s philosophy reminded me a lot of the lessons taught in The Alchemist: whenever you’re pursuing your treasure, the universe conspires to help you. Throughout Greenlights, Matthew took signal after signal from the universe and followed the path unabashedly.

And it worked well for him. Between Mathew’s steel confidence and the universe’s signals, he seemed to forge a life worth living and worth exploring.

As with every book, I always try to abstract the lessons I learned so that they can be tied into usable knowledge. But to pull the usable knowledge, we really need to dive into this concept of confidence.  

What is confidence and how is it built?

Confidence starts on the inside, but manifests on the outside. It can easily be spotted in an imposter with the tremble of a vocal cord or the nervous twitch of an eye. Confidence is attractive to the onlooker but invisible to the actor.

Confidence is one of those elusive traits that we each wish we could embody. It is the reason we enjoy videos of guys picking up girls on YouTube, seeing the lone coworker raiser her hand to ask a question during the meeting, and looking towards our fearless leader when all has gone to hell.

No matter how many times we see examples of confidence, it never seems to manifest in self-confidence.

Instead when it’s our turn to ask the girl out, we make an excuse, and we walk away.

Most people believe that they would have more confidence if they had further certainty in the outcome.

If I knew the girl would say yes, I would ask her out; if I knew the entire class wouldn’t laugh, then I would ask my question, if I knew that this business decision would yield a positive ROI then I would make it.

But this is often the wrong way to frame confidence—in fact true confidence comes not from being certain in the outcome but knowing that you can handle any outcome that occurs.

Me personally, I used to be deathly scared of getting called on in class to answer a question. The mental chatter kept warning me of the impending embarrassment if I answered the question incorrectly, and so I’d always shrink to make myself as small as possible when the teacher asked, “anyone?”

In these situations, it’s not about knowing that the class won’t laugh at us, but instead understanding how do we react if that happens?

Do we tell ourselves we’re stupid? Do we chastise ourselves for the idiot mistake? Do we run away and hide?

Or do we value ourselves for taking the risk? Do we value ourselves for trying? Do we reward ourselves for our daring foray?

As with most topics, it seems the beginning starts with understanding ourselves and our values. As a kid, I used to value myself for getting good grades and being smart. Ten years later, I now value myself for learning. It’s not that I always make the right decision, it’s that I know that even if make the wrong decision I can handle it.

As John C. Maxwell said, sometimes you win, sometimes you learn.

Once your reframe your world to that simple sentence, suddenly doors open up. Stop worrying about being right, stop worrying about getting the job or the girl or the investor’s money.

Instead, worry about what your inner voice says when you don’t. What are you telling yourself in your lowest of lows?

Are you saying you have done bad things and that makes you a bad person?

Or are you saying that you have done bad things and that made you a better person?

It’s a small difference in vocabulary, but a massive difference in beliefs.

So, if you want more confidence, then walk into the place like you own it; but when they kick you out, sit there with your thoughts for a little bit. Listen closely to what they’re saying. You might just find what you were really looking for.

Greenlight.

“New products fail for many reasons. But the root of all innovation evil…is the failure to put the customer’s willingness to pay for a new product at the very core of a product design.”

Madhavan Ramanujam and Georg Tacke in Monetizing Innovation

As someone with a UX background, I can confidently say that design thinking is getting too much of the spotlight these days. We often think that if we work with our customers and design and build something beautiful, the money will come. In reality, the business plan is the fundamental building block for any new product, and that starts with pricing.

This is exactly what Madhavan Ramanujam and Georg Tacke argue in their book, Monetizing Innovation. They explain all successful businesses have started with a market and pricing strategy, and then this falls into the design of the product. Asking customers how much they will pay for a potential product is the only sure way of knowing if a product will have any value. The consequences of not doing so are:

1. Feature Shock: too many features in one product
2. Minivation: an innovation that is incredibly successful for the market, but priced too low
3. Hidden Gem: a potential blockbuster product that is never properly brought to market
4. Undead: an innovation that customers don’t want but has nevertheless been brought to market

Each of these are surefire ways to see diminished (or negative) returns on your value. For me, the biggest concern is by far an ‘Undead’. Never do I want to bring a product to market only to have no one use it.

In the book, Madhavan and team go on to explain the basic process for proceeding with this phase of idea validation:

1. Conduct a WTP (Willingness to Pay) research study to determine price points and features ordered by desirability
2. Use the previous information to determine customer segmentation. Identify your targets and size the market opportunity
3. Build product configurations (and bundling if applicable) based on customer segmentations.
4. Develop a pricing strategy

There are a few additional steps as well but for the purpose of today, we won’t dive into these. Instead I will focus on these four steps in a small example to solidify the understanding.

I’ve been working on a new product idea with my girlfriend and a few other friends; the idea is called Challenge Me. It’s a mobile app that dynamically connects you with your friends and presents you all with random challenges to accomplish in random locations, generally located outdoors in public parks. All along the way it asks you to record video of yourself conducting the challenges and will stitch together the videos of you and your friends in a memory.

One of the questions I’ve been trying to answer is how do we validate this opportunity? We had gone on to design it and show it to some of our friends—various feedback has come up, but there was no big, ‘aha’ moment. I want to know exactly what the market is for this opportunity.

According to Monetizing Innovation, this really starts with a survey to determine WTP and customer segmentation.

For example, as of right now, I’m 95% confident customers would be willing to pay between $1 – $30 a month for this product (a wide confidence range until I conduct the survey!). I imagine we’ll have two distinct customer segmentations: one that is primarily interested in the random challenge part of the app, and one that is primarily interested in the video and sharing aspect of the app.

Different customer segmentations may value the product differently. For example, the random challenge group may only be willing to pay $1-$10, but the video sharing group may have a higher threshold, $10-30$.

I imagine our target customer is college age kids and early in careers that are primarily interested in outdoor activities. In the triangle region there are around 60,000 students per year, plus an additional 15000 early in careers entering the market of which let’s says 40% (I will assume a 95% confidence interval of 20%-60% and take the average) are interested in outdoor ‘challenge-like’ opportunities.

I’ve established a fairly high number here because North Carolina is a fairly outdoor activity focused state. That puts are market size to 30,000 prospective buyers. Assuming an 80/20 split on challenge to video sharing segmentation, and also assuming a normal distribution of prices ($5 for the 80%, $20 for the 20%), that puts our monthly market to $240,000. Or a yearly market opportunity of $2.8M.

If we scale the business outside of the Triangle region of North Carolina to Austin, Denver, and Portland, we look to potentially more than quadruple our market opportunity for a cool $11.2M market size.

Of course that fancy math was a lot of assumption—but performing the calculations with some simple confidence intervals helps understand what data points we need to work on narrowing down with real data. From here, we validate our prior beliefs with quantitative data.

You might have one doubt that surfaced: is there a better way to monetize other than monthly subscription?

In Monetizing Innovation, he delves into a few different models such as Auction, Performance Pricing, and Usage. The main alternative option in this case, of course, is to go with a Freemium model, though I would only do this if we could encourage a sizeable portion of the market to upgrade to the premium version.

Instead, what seems like the best business strategy is to start with a ‘Skimming Strategy’. This is what Tesla did when they released a high-priced premium car and later built a cheaper version for the market. This enables you to make money early, while building your loyal customer fanbase, and naturally leads to word of mouth advertising.

For Challenge Me, this means targeting the loyal fans who love the idea of doing random challenges with friends and recording video, and then slowly release a version with less features for the less enthused later.

Either way, as this example has hopefully shown, there is a lot of thought that should occur well before you begin designing your business idea. Instead the main focus of work should revolve around the size of the opportunity and the monetization plan. Once your forecasts are made, only then can you intelligently budget for an opportunity, design with excellence, and bring to market.