A few weeks ago, a friend introduced me to a group of friends at dinner. He said, “This is Toby, he runs a stock picking company.”

I smiled politely. But inside I was like — broo, no ☹️. That is not what we do.

And here’s the weird thing. It wasn’t just that the label was wrong. The label changed how the person across the table treated me. The immediate question directed to me is:

“Bro jadi saham apa ni lagi bagus?” (”What’s a good stock to buy now?”)

asking for a hot tip. Under such a scenario, I smile and wave like the penguins in the Madagascar Movie.

Had my friend said, “This is Toby, he runs a company that acts as a Personal CIO for busy professionals,” the conversation would have gone completely different. The person would have asked me how I think about portfolio construction. How I assess risk. How I stay convicted during a downturn.

Same person. Same dinner. Same Toby. But a different label can produce a different conversation, which could produce a different relationship.

So I’ve been thinking about this quite a bit.

A programmer taught me this first

So I studied Computer Science back in university. One of the first things you learn — before data structures and algorithms, before anything fancy (that I have mostly forgotten) - is how to name things properly.

This sounds trivial. But I have come to realise that learning about naming things properly is not trivial at all.

A code base is like an essay, akin to the one you are reading now, that serves a purpose to instruct computers on what programmers want computers to do.

So even if you don’t code, you could:

• be confused by a codebase OR

• have somewhat of an understanding what the code is trying to do.

depending on how well names are written.

For example, a variable called

data

tells you nothing about the data that it is supposed to store. But a variable called

monthlyRecurringRevenue

tells you a very clear thing. It tells you that it should be storing monthly recurring revenue.

When a developer reads the second name, they would know what the line of code does. They know what the number should look like. The name itself becomes a thinking tool.

Let me say that one more time. The name itself becomes a thinking tool.

You could imagine:

Hmmm, if the company now gets an additional stream of monthly recurring revenue, how should I update the calculation of this monthlyRecurringRevenue ?

vs

Hmmm, if the company now gets an additional stream of monthly recurring revenue, how should I update the calculation of this data ?

Do enough rounds of the 2nd scenario and I probably will start losing hair.

In software, bad naming leads to bugs. Not because the code breaks. But because the developer misunderstands what the code is supposed to do. The logic was fine but label was misleading. And the misleading label led to the wrong assumption which led to incorrect modification or improvement of code.

The same thing happens in investing

When people label what they do as “trading,” they behave like traders. They check prices hourly. They panic when red candles show up. They celebrate green candles. In short, they become a servant to the price chart.

When people label what they do as “owning productive businesses for the long term,” they behave like owners. They study the annual report. They assess the management team. They ask: is this business generating more cash this year than last year? How’s the retained earnings of the business this year like? They hold through the noise because they have a mental model that can absorb the noise.

Warren Buffett is arguably the greatest investor of all time. And it seems to me that one of his biggest edges is not just spreadsheet. But it’s his vocabulary.

He doesn’t call himself a “stock picker.” He calls himself a “business picker.” That single reframe changes everything. A stock picker looks at a ticker and thinks about price movements, entry points, and when to sell. A business picker looks at a company and asks: does this business make high returns without putting up much capital? Will people still want this product in coming decades?

And here’s where it gets crazy. Buffett watched Coca-Cola for 52 years before buying it. Yes, he sold Cokes as a six-year-old from his grandfather’s grocery store. He saw the product dominate the world for half a century. But he didn’t buy a single share.

Why? Because for a lot of his career, he was using Ben Graham’s framework, which labelled a good investment as a “cheap stock.” Coca-Cola was never cheap enough by that definition. It was only when he reframed his approach — from finding “fair businesses at wonderful prices” to finding “wonderful businesses at fair prices” — that he could see what was right in front of him.

Same Buffett. Same Coca-Cola. Different name for what he was looking for. The old label caused him to overlook the opportunity for 52 years. The new label made it obvious. Shocking.

Your emotions work the same way

Here’s where things get even more interesting. I recently read a book about how emotions are constructed by Lisa Feldman Barrett. And her core argument really shook me.

She argues that emotions don’t have universal fingerprints. There’s no single pattern in your brain or body that maps neatly to “anger” or “sadness” or “fear.” Instead, your brain constructs the emotion based on what concepts you have available.

So if you only have the word “stressed,” then every uncomfortable feeling becomes stress. You’re stressed when you’re actually exhausted. You’re stressed when you’re actually lonely. You’re stressed when you’re actually hungry. But if you have richer labels — if you can distinguish between overwhelm, resentment, restlessness, grief — you can respond appropriately. You sleep when you’re exhausted. You call a friend when you’re lonely. You eat when you’re hungry.

Better labels, better responses. Worse labels, worse responses.

This is exactly what happens to investors who lump everything under “the market is scary.” Is the market correcting because of valuation compression? Or because of an earnings miss? Or because of foreigners pulling out? Each of those has a different implication and a different appropriate response. But if your only label is “scary,” your response is confined to panic.

Recompound: Your Personal CIO

We don’t really call ourselves a stock picks service. We don’t call ourselves a robo-advisor. We don’t call ourselves a wealth management platform.

We call ourselves your Personal CIO. Chief Investment Officer. And that is deliberate 🙂

Because a CIO doesn’t give you hot tips. A CIO thinks deeply about capital allocation on your behalf. A CIO has conviction rooted in analysis, not hype. A CIO stays when things get boring — and 99% of investing is boring. And a CIO is here to serve you, the CEO.

The label isn’t really a marketing gimmick. It is our own mental model on how we should behave and do our jobs day to day. And hopefully, the mental model could shape how our clients relate to their own wealth too.

When our clients understand that they have a Personal CIO, they stop asking “what stock should I buy today?” and start asking “how is my portfolio positioned for the next 5 years?” That shift, from stock tips to stewardship, is the name of the game.

So what’s in it for you?

Here’s the practical takeaway. You don’t need to read a neuroscience book or learn to code or become a Recompound customer to apply this.

Just pay attention to the names you give things.

If you call your investment portfolio a “trading account,” you probably will trade. If you call it “my family’s long-term wealth,” you probably will put more thoughts to safeguard it.

If you call your morning routine a “grind”, it can end up feeling like suffering. If you call it “prep”, it will feel like a lifestyle with purpose.

If you call a market downturn a “crash,” you can end up feeling panicky. If you call it “a sale,” you will start asking: “how to look for bargains?”

The names you give things are not just descriptions. They become more of instructions really. They tell your brain how to feel, how to think, and ultimately, how to act.

So choose your names carefully.

Cheers.

A sequel to “I had lunch with a cinema owner.”

Since we are talking about the use of AI in my line of work, I would like to preface this write up by clearly communicating what this write up is not.

It is not an expert opinion about how the investment industry is going to take shape in the future

It is not an editorial whether AI will replace more knowledge workers in Jakarta

It is also not about financial advice as there will be a brief discussion about a stock research that was conducted using AI.

You can treat this writeup as a data point for how AI is currently used by Co-Founder of an early stage wealth tech startup in Indonesia.

With that, let’s get cracking.

There is a wise 80 year old man

Who likes to write memos documenting his thoughts embroided with his investing philosophy that he has accumulated for more than 5 decades. He manages close to $200 billion of funds and he generously publishes his thoughts to the public free of charge. One day, a fellow value investor shared with me his most recent memo. He writes a memo about his experience using Claude. I dropped everything and went on to read what he has to say.

In his latest memo, Howard Marks describes asking Claude to write him a tutorial about AI. What came back was 10,000-word essay that referenced his past memos, anticipated counterarguments and Claude even sprinkled humor here and there. I couldn’t imagine being in his shoes, witnessing the amount of technological progress in his life time. I mean he was born in an era where digital photography was not invented yet. Now he is dealing with a machine that writes a note as good as what a competent colleague would do.

But Marks being Marks, did not stop at awe. He pushes further. He questions deeply into what is the likely implication of AI to the field of investing. If AI is so good at gathering and synthesizing data, is there a place for mere mortals like Toby and Budi?

Note: Marks didn’t say Toby and Budi in the memo because we are really just mere mortals

Well the answer comes from a person who studies the spread of diseases, an epidemiologist Marc Lipsitch. He observed that humans make decision using three core components:

1. Facts,

2. Informed extrapolation from analogies to prior experience, and

3. Opinion or speculation

Marks is saying that AI is beyond this world for (1) and (2). Perhaps even better than any human alive. Just like Stockfish (the chess AI) is better than Magnus Carlsen. But he says that AI is genuinely weaker in novel situations. In other words, AI is probably not as good as humans who have lived experience with minimal data in the internet (information used to train AI models).

He further went on to say that humans (at least the best humans) still hold an edge in situations that are genuinely novel, where there is no historical pattern to rely on.

But here is what I kept thinking about after reading the memo.

If AI is this impossible to beat at facts and extrapolation, shouldn’t we trust its opinion too? It does not have anchoring bias. It does not have fear or greed. It does not hold onto a losing position because its ego cannot stomach the loss. It is not swayed by narratives — the very thing Shiller described to us in Part 1.

In the mean time, look at us. Look at the quality of judgment that human beings produce. You can think of the decisions made by leaders around the world. We are emotional, inconsistent, stubborn. We lie to ourselves. We hold onto beliefs long after data and evidence proves them wrong.

So how would humans, a being this flawed, stand a chance in having superior taste, judgement and opinion?

I didn’t fully understand what Marks said.

But above all, I was feeling very competitive. I grew up in a Singaporean kiasu (fear of losing) culture and I simply didn’t want to lose out to this 80 year old wise person. Prior to reading his memo, I never used Claude before.

So like any other kiasu person, I went on to buy the Claude max plan to give it a spin.

I want to have a better grasp of what does Marks mean. So I started where any kiasu person would start.

I wanted to test how far AI can actually go in my work. Not in theory. But in practice, on a real stock that I was actually studying. And I want to be honest — part of me was hoping AI would just be better. That would make my life a lot easier.

The company that I studied was Sarana Menara Nusantara (TOWR)

TOWR is Indonesia’s largest independent owner and operator of telecommunications infrastructure. A Djarum owned company, it owns about 30,000 towers across the country and leases space on them to telco operators like Telkomsel, Indosat, and XL. The tenants install their antennas and equipment on the tower, pay rent, and the contracts are locked in for 10 years. It is a beautifully predictable business.

The current factor that is driving TOWR’s profitability

Aside from average selling price of the lease agreements (which is not the focus in today’s discussion), is also TOWR’s colocation model. Being an independent telco tower operator, TOWR is able to host more than 1 tenants in its infrastructure (example tenants are Telkomsel, XL and Indosat).

Now the capital expenditure for having 1 tenant is large, as you have to either build a new one or acquire towers from existing industry players (TBIG is also in the same industry). But an additional tenant at the same tower involves minimal capital expenditure which has a direct contribution to its profitability. You can imagine getting additional revenue without most of its expense. It would go straight down to profits.

So to repeat, having an additional tenant or a high tenancy ratio (average number of tenants per tower) is highly desirable for the company as it is associated with higher profitability.

But of course, the market has largely been harsh.

You could see below that the price of the share has seen a 60% drop in the last 5 years as this post was written. Markets might be harsh because TOWR might be seen as having an obsolete business especially because telco companies will have lesser need of those towers.

But there’s another phenomenon that might cause immediate headwind to TOWR’s profitability that the market does not like.

Consolidation, consolidation

To give you more context, the telco industry in Indonesia has seen multiple consolidations in the past 5 years. Starting with Indosat and Hutchinson’s merger in 2022. And the most recent merger of XL and FREN back in April 2025.

Why events such as this is pertinent to TOWR’s profitability?

I suspect the answer is because consolidations would reduce tenancy ratio (discussed above). Usually we had 5 telco players prior to the consolidation. Now that we have 3, the merged telco companies no longer need to rent the same tower space.

So of course, tenancy ratio has dropped for the past few years from 1.88 in 2021 to 1.61 in 2025.

So the question: now that there was a recent merger of FREN and XL in 2025, how bad will tenancy ratio actually get, and for how long?

My plan is simple

I want to use AI to help me use Agent Based Modelling and Monte Carlo Simulation technique to model out the probable tenancy ratio outcomes.

For those unfamiliar,

Agent Based Modelling

is the idea that instead of modelling an entire system with a single math equation, you model the individual pieces and let the system emerge from their interactions.

In TOWR’s case, each tower is an “agent” with its own characteristics. Location (urban, suburban, rural), whether it has fibre connectivity, how many tenants it currently has, how much exposure it has to the merging operator.

You give each tower a set of probabilities (chance of gaining a tenant, chance of losing one, chance of getting 5G equipment) and then let all 30,000 of them play out over a period of time. The system-level result — the tenancy ratio — emerges from 30,000 individual stories, not from a top-down assumption.

Monte Carlo Simulation

is the idea that you run the same model hundreds of times, each time with slightly different random outcomes, to see the range of what could happen. Think of it like rolling dice 200 times and tracking the results. Any single roll tells you nothing. Two hundred rolls give you a distribution, what’s likely and what’s extreme.

Combine the two: 30,000 towers, each with their own probabilities, simulated 200 times per scenario. That gives you a probability distribution of where the tenancy ratio might land — not a point estimate, but a range of possible outcomes.

Now here’s where it gets interesting.

Building the model was the easy part. AI handled that quite nicely. The hard part was...

Claude was impressive

It built the entire agent-based model. It ran simulations and produced charts with confidence bands. If you saw the output, you would genuinely think a quant team produced it. Take a look.

So I started looking at the parameters. One of the key inputs was the organic colocation rate — how often a tower gains a new tenant through normal business activity.

Claude estimated this by looking at 2024 data: TOWR added 3,751 tenants across roughly 30,000 towers. That gives you about 2.5% per quarter, which makes sense.

But something about 2024 felt off. I remembered reading TOWR had acquired a competing tower company called IBST in 2024. So I went to NotebookLM — which had the actual company filings loaded — and asked it to separate the organic additions from the acquired ones.

Turns out, a significant chunk of those 3,751 tenants came from the IBST acquisition. They were bought, not won (organic). So Claude had used a contaminated year to set one of the most sensitive parameters in the entire model.

The corrected organic rate was closer to 1.0% per quarter (originally was 2.5%), which is a big shift. That single number meaningfully changed the five-year trajectory of the tenancy ratio.

But the assumptions underneath were wrong. And they were wrong in ways that sounded right.

Here’s another one. The model assumed that when the merged telco operator (XLSMART) decommissions a redundant tower, about 60% of the time they would relocate their equipment to an existing TOWR tower nearby. That sounds reasonable — why build a new tower if there’s already one available?

But it turns out TOWR has a strict no-discount policy. Whether you colocate onto an existing tower or order a brand new one, you pay the same rate. So the operator has zero financial incentive to compromise on location. They always choose the network-optimal spot, which usually means a new build. The actual number was closer to 25% colocating onto existing towers, not 60%.

Nobody would know this from the outside. It is buried in how TOWR structures its commercial relationships. NotebookLM surfaced it only because I asked the right question — and I only knew to ask because the economics felt off. Which I also don’t know how to describe myself.

This happened over and over. Non-MNO tenants that I assumed occupied tower space turned out to be purely fibre clients — the parameter should have been zero, not 0.5%. A bell-curve churn shape that I had assumed turned out to be wrong because tower contracts are irrevocable — churn is driven by contract expiry schedules, not operator discretion.

Each correction required me to ask a question that AI did not think to ask itself. And at the end… I got this results.

The results looked nearly identical to the naked eye, yes?

But the assumptions underneath the second picture have been far more closely scrutinised. I challenged every parameter and in many cases corrected them too. The organic colocation rate was halved. The swap ratio was cut by more than half. Non-MNO tenants were zeroed out. The merger intensity was redesigned entirely.

And yet, even after all that work, the interpretation of these results still differs. An AI would present the base case median as the most likely outcome. A cautious analyst might anchor to the bear case. An investor with experience in Indonesian telcos might look at these charts and see something else entirely based on relationships and context that never made it into the model. Which brings me back to the 80 year old man.

Where the human edge actually lives

Remember Marks and the Lipsitch framework? Facts, extrapolation, opinion. AI dominated the first two. The question was whether humans could still be relevant in the third.

After some time of working with Claude and NotebookLM on this analysis, I think I have a bit more understanding of what Marks was saying. It is not that humans have superior opinion. It is that humans have a bit more situated opinion.

We carry context from our own lives that no model has access to.

Every correction I made came from something I already knew or something that felt off based on lived experience or a prior reading that I came across, and so on. Perhaps from knowing what it feels like to lose money after making a wrong bet, that tends to sharpen our instincts all around and then asking the questions that turn out to be important.

So it is not uncommon to ask “are you being optimistic?” on other sub-areas of research.

It came purely from the gut, not analysis.

I don’t think any of this is genius. It is just being aware of context and applying lived experience to what we are studying.

So what helps in the age of AI

I think being hyper observant helps. We have so much lived experience, that is information we can glean right away from our senses. The internet is a huge source of information. But I don’t think it is right to underestimate the wealth of knowledge we get from walking to Indomaret, or travelling out of town from Jakarta to Manado. These experiences can often carry insights to our line of work in ways that is simply unimaginable to an AI.

I also think that willingness to try things is an important one. While researching and understanding a public company is still difficult work and reading convoluted responses of an AI could be tiring. But hey, I don’t have to write a single line of code in doing monte carlo simulations anymore. That’s bananas. AI is certainly helpful in saving huge precious time and allowing my inquiry to be more robust.

Lastly, intellectual honesty would be the most important ingredient. I don’t think there’s a point of being observant, trying new things and then lying to yourself about deriving a conclusion that I myself want to hear. The study should lead to a better understanding which hopefully would bring us to a better decision all around.

Closing remarks

That’s all folks, thanks for reading this far! If you fancy, give Claude or any other AI tools a spin. I am not just curious on how it is helpful in studying a company. But I am also curious how it applies to other lines of work, like healthcare, technology, consumer, anything. So if you are so kind to share your experience, do share them in the comments!

Cheers.

Those in the investment scene will need no introduction on who Chris is. For the benefits of those not very involved in the investment circles (no shame about this, because you are busy living life in your own niche circle), Chris is the founder of Bibit, which later got acquired by Stockbit. He also found the holding company Clapham, which owns a number of F&B companies.

Beyond the companies that he have founded, though, Chris is just an amazing human being. Speaking to him almost felt like meeting a soul brother. Some of the things he talked about were the things that I privately preached in my tiny circle, but often feel a bit shameful to share publicly. I thought I was just a weird person to have these beliefs and so I kept them to my closest circle. But hearing them coming from Chris just felt like a huge validation boost. There were countless moments when I thought in my head

Omg! I can’t believe you are thinking the same thing!

I genuinely had a great time speaking with Chris. Two hours passed which felt like 30 minutes. I hope this can be a useful companion for you to listen to when you are stuck in traffic, when you are on your long runs, or just want a better evening entertainment (to replace doom-scrolling and Netflix).

We did talk about both investment-related and non-investment related stuff. Here are some breakdowns just to help you decide if this is worth your time.

Investment-related topics:

• Changes in the Indonesian capital market 10 years ago vs now

• Whether value investing is dead

• Whether it is possible to make money in the stock market

• Managing the emotional roller-coaster when investing

• The impact of MSCI downgrading Indonesia

• The future of banking stocks in Indonesia

• How to evaluate banking stocks

• Specific stocks mentioned (not a recommendation): Astra, Gudang Garam, Prodia

Non-investment-related topics:

• Chris’ experience building Bibit

• How work and life would change with AI

• How we should view our relationship with money

• How to make yourself smarter by managing your information diet (hint: Substack)

• What you should know when deciding to invest in global stock market

Thank you , , , , , and many others for tuning into our live video with and ! Join us for my next live video in the app.

Also, drop us a comment on who you want us to talk to next time and the topics/questions you want us to cover.

Until next time, folks!

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Last Thursday, Budi and I had an incredibly insightful conversation with Chris Angkasa. For those who missed it, I am very sorry. We are trying to push Substack to resolve a technical difficulty and get the live recording (for some reason it does not get saved in my draft). So if that gets recovered, we will publish it. But one key lesson that stood out, amongst many gems that were mentioned, was the emphasis to write down things that we do not know instead of things we know.

Let me repeat. One of the key lessons was to write down the things that we do not know (surrounding our investments) instead of the things we know.

This resonates deeply with Nassim Taleb’s concept of epistemocracy. In his book the Black Swan, Taleb discusses about an epistemocrat, a person who is well aware of the limitations of their knowledge. Instead of being overly confident towards exclaiming their knowledge prowess, they continue to question the truthfulness of their understanding. As a result, they will not be rushed to commit to a brash decision, they will make claims with adequate qualification and they will not be overzealous in their predictions of the uncertain future.

Taleb loves epistemocrats. He even goes to say that a utopia is a world that is ruled by epistemocrats. A society that gives their constant questioning of knowledge legitimacy. He calls that world an epistemocracy.

Well, it needs no convincing that such a world obviously does not exist today. A politician who claims that they don’t have a full picture about how the country would progress amidst global uncertainty will not gain votes. As the overconfident counterpart will make better promises and fare better in elections.

An entity who’s in the investment space (for e.g. Recompound) who does not know the 2nd order impact of a middle eastern conflict to an earnest public company selling ceramics to a domestic market in Indonesia will not gain as many followers as an investment guru who can “reverse engineer” and time when a market crash would occur.

But what’s the value of a person who admits the things they don’t know?

Understandably, you might be thinking:

“what’s so special about being an epistemocrat? All I am seeing is a timid mostly ignorant overthinker who is reluctant in making decisions with respect to their knowledge that they aren’t 100% sure about. How do they gain followers, influence, power and ultimately, money?”

Let me help you clear the confusion.

The value of an epistemocrat is not in the predictions they make. It’s in the predictions they refuse to make. They catalog their ignorance, writing down the things that is uncertain and unknowable. When they are tempted to want to know the unknowable, they avoid doing so.

Let me make this concrete. Picture a pool table.

It is a Friday night and you are playing billiard with your group of friends, a boys night out at a Jazz bar in Canggu. Now it is your turn to hit that 8 ball with the cue ball. Given the initial position of the cue ball, how hard you hit the 8 ball, you could mathematically compute the positions of the two balls after.

Guess what’s the endpoint? Well if you guess that the 8 ball will be in the top right corner as the cue ball remains in the same quadrant, then you are correct.

But, your friend, Bob, are given the position below as the end point after your turn.

Do you think Bob could guess where the 8 ball and the cue ball came from initially? I don’t think so. It is quite impossible because the cue ball and the 8 ball could start initially from anywhere! I hope you’d agree with me on this.

Therefore, it is borderline crazy to say with relative confidence where the ball come from, except Bob starts yapping:

Actually, look at the spin on the 8 ball — see how it’s slightly off-center? That tells you the cue ball struck it at roughly a 35-degree angle with a left English. The only position that produces that angle while leaving the cue ball where it is? Lower-left quadrant, two diamonds from the corner pocket. And your friend is right-handed, tends to favor an elevated bridge, which biases his break angle. Factor that in and honestly, there’s only one plausible starting configuration. Cue ball bottom-left, 8 ball dead center. I’d bet money on it.

Bob is so confident 😂

Well, here are more explanations that you might hear from time to time. They don’t confine themselves to you playing pool with your friends. The overconfidence extends to cover economy, politics, markets and so on.

Either in WhatsApp groups, family conversations or straight up “experts” fire chats. Below quotes might ring a bell. Although I have to give you fair warning that identifying causal errors in the made up sentences can feel unnatural*.*

On COVID-19: “If you were paying attention to the epidemiological data out of Wuhan in late December, the R0 alone told you everything. A novel respiratory virus with asymptomatic transmission in a hyper-connected global economy with daily international flights? There was only one outcome. I flagged this to my team on January 3rd and said — this goes global by March, lockdowns by April. The writing was on the wall. People just chose not to read it.”

On AI replacing jobs: “This was completely predictable. The job was 80% pattern recognition and template-based output — exactly the task profile that transformer models excel at. Once GPT-4 hit the market, anyone doing that kind of work had maybe 18 months. The companies that didn’t restructure were just in denial. I’ve been saying since 2022 — if your job can be described in a two-page SOP, it’s already gone.”

On climate change: “The science has been there since the 1800s — Arrhenius literally calculated CO2 warming in 1896. You had ice core data showing the correlation, satellite measurements confirming it since the 70s, and every single climate model trending in the same direction. When you combine that with post-industrial emission rates doubling every 40 years, there was only one trajectory. I’ve been saying since 2005 — we hit 1.5 degrees by 2030, extreme weather events triple by 2025. This wasn’t a prediction, it was arithmetic.”

You have got to love AI for saving me time digging through my WhatsApp and making me these texts. If needed, you can also use it as your thinking buddy by asking “where’s the causal error in the sentences that I am reading, what other range of possibilities that can occur”.

Value of not knowing things

Great, now that we have established the logical fallacies people are tempted to make in cocktail parties (and their corresponding mispredictions), we can move on to the central argument of this article:

which is being an epistemocrat maximises the chance of long term compounding.

Exponential Growth Bias

Now you have 5 seconds to think and guess. Promise? 5 seconds only. What is the answer to the below multiplication question?

Ok proceed once you have submitted your answer.

This is a math question that was asked in Kahneman and Tversky’s experiment. The median estimate of the group’s response was 512. When the question is flipped, starting from 8 times 7 and so on, the median estimate rises to 2,250. The correct mathematical answer is 40,320. If you guessed incorrectly, how surprised are you? Well certainly my guess was wrong when I first attempted the question.

This experiment tells us that we like to massively underestimate exponentially growing numerical series. We tend to fail to grasp the non-linear acceleration of growth, towards the end.

It is reported that the size of this underestimation is considerable: it is common for two-thirds of subjects to produce estimates that are at or below 10% of the actual (normative) value. For example in another test, many subjects expected a population growth target that would naturally be hit in 1979 to not be reached until the year 2000.

What else does research say about exponential growth bias? A number of things. But one thing that strikes the most to me is

people’s immunity to experience, education, and instruction when it comes to having this bias.

• This bias occurs even if you have a strong mathematical background: A subject’s number of college credits in mathematics had no significant correlation with their ability to accurately predict the growth.

• This bias occurs even if you have an extensive professional experience: An experiment testing professional decision-makers (members of a government Joint Conservation Committee) whose jobs require understanding growth processes showed they performed no better than naive undergraduate subjects. Daily experience with growing processes does not reduce the underestimation.

• This bias even occurs after a direct instruction: When subjects were given a 75-minute lecture on exponential misperception, shown numerical examples, and given immediate feedback before being tested, their core perception of the mathematical exponent only improved slightly. Instead of truly understanding the non-linear curve, these “sophisticated” subjects simply attempted to evade the error by universally inflating all their guesses linearly across the board.

Wow, so compounding, being the 8th wonder of this world also happens to be something that is:

• grossly underestimated

• incomprehensible to our human brain

Now that we know that wrapping our mind into compounding is somewhat of a loss cause, let’s take another look at another property of compounding.

It cannot compound if it gets disrupted

Remember your overconfident friend, Bob, from a moment ago? Yes he’s the one who plays pool but he also likes to say things from time to time about the market.

“Look, it was obvious. The yield curve inverted in August, manufacturing PMI was contracting for three straight months, and the Fed was hiking into a slowing economy. Layer on the fact that insider selling hit a two-year high in Q3 and you had every textbook signal flashing red. Anyone who didn’t see this coming simply wasn’t reading the data. I told my subscribers in September — we’re six weeks from a correction. Sell everything.”

You listened to him as his prediction was correct. So a few months down the line, he muttered the exact same line of argument, this time about the geopolitical tension that is causing investors to be jittery. He decides to again, sell everything and you decide to follow suit.

Only to find out weeks later that geopolitical tension actually causes a steep rally to commodities and commodity producing stocks that you used to own. Because of Bob’s overconfident assertions, you missed 10 best days of your stock portfolio. Well not so much of a big deal right?

Wrong.

According to JP Morgan’s research, $10,000 invested in the S&P 500 from January 2005 to December 2024 would have grown to $71,750 if you stayed fully invested. Miss just the 10 best days — ten days out of roughly 5,000 trading days — and you’re left with $32,871. That’s more than half your wealth. Not because the market crashed. But because you weren’t there when it recovered.

And here’s what makes Bob especially dangerous: those 10 best days occurred within two weeks of the 10 worst days. The biggest rallies can happen right after the sharpest drops — exactly the moments when Bob has already convinced you to sell everything.

But being wrong is not the issue here, it is the act

I make wrong predictions all the time. I predicted that Manchester United would win the Premier League after Sir Alex Ferguson retired under David Moyes (you guys are probably thinking that I was hallucinating, I was not). When Cristiano signed for Man Utd again, I also thought that year was going to be the year. But nope. And you could probably see clearly that my wrong prediction of Man Utd’s glory is not a problem. Why? Because it costs me nothing except some dignity amongst my Liverpool “friends”.

Bob’s prediction cost you $38,879.

Bob’s overconfidence didn’t just make him wrong. It made him act. And the action — not the necessarily wrongness — is what killed the compounding.

So what would an Epistemocrat probably do?

They draw a sharp line between predictions they can enjoy (football, cocktail parties, WhatsApp group debates) and predictions they refuse to act on (portfolio decisions). I suppose like normal people, they still have opinions. But they stop letting opinions that fall on the “unknowable” list touch their money.

Overconfidence attacks compounding from the outside, through unnecessary action. Exponential growth bias attacks it from the inside, by making you feel like nothing is happening so why bother staying invested. The long-term investor is fighting on two fronts at the same time. The epistemocrat’s toolkit — writing down what you don’t know, resisting the urge to act on noise, accepting that years will feel flat — is a defense system against both attacks at once.

That is why being an epistemocrat can maximise your chance of long term compounding. Not because you know more than Bob. But because you know what not to act on.

All of this starts with one shameless/ful admission: we don’t know some things about macro and about our own investments. And yet we invest anyway.

Simple in theory. Counter intuitive to wrap our head around. Very hard to practice over and over again.

I sure hope Substack can find the Live recording with Chris Angkasa last Thursday. There were more gems covered in the talks. Or we can do another one 🙂

References

In case you’re interested in reading the materials consulted in writing this article, below are the entry points:

1. Taleb, N. N. (2007). The Black Swan: The Impact of the Highly Improbable. Random House. Chapter 12: “Epistemocracy, a Dream.”

2. Tversky, A. & Kahneman, D. (1974). “Judgment under Uncertainty: Heuristics and Biases.” Science, Vol. 185, No. 4157, pp. 1124–1131. [The 1 × 2 × 3 × ... × 8 anchoring experiment.]

3. Wagenaar, W. A. & Sagaria, S. D. (1975). “Misperception of Exponential Growth.” Perception & Psychophysics, 18, pp. 416–422. [The foundational paper on exponential growth bias: two-thirds of subjects estimating below 10% of the actual value, immunity to instruction and professional experience.]

4. Stango, V. & Zinman, J. (2009). “Exponential Growth Bias and Household Finance.” The Journal of Finance, 64(6), pp. 2807–2849. [More-biased households borrow more, save less, and favor shorter maturities.]

5. JP Morgan Asset Management (2025). Analysis of S&P 500 Total Return Index, January 2005 – December 2024. Cited in: Megan, L. “Selling Out During the Market’s Worst Days Can Hurt You, Research Shows.” CNBC, April 7, 2025. https://www.cnbc.com/2025/04/07/selling-out-during-the-markets-worst-days-can-hurt-you-research.html

6. Recompound Live with Chris Angkasa. [Recording pending recovery from Substack.]

Everyone who wants to pick up a new skill will start out as a novice. I have yet to see a person picking up chess for the first time and be at the levels of Magnus or Hikaru. I also have yet to see a person who picks up football for a couple of months and suddenly be as good as Cristiano Ronaldo or Lionel Messi. It seems obvious enough for us to know that developing a skill takes time and effort in the world of chess and football. In other words, we don’t have to be good at football and chess to know that we suck at those sports (yes chess is a mental sport 😉).

But I am not sure if the same can be said about investing.

It seems to me that overwhelmingly many people are eager to declare that they are a great investor, especially during bullish times. Or at the very least, it seems that many people believe that achieving 25% is an easy thing after they buy a really expensive “investment course” that promises them 1,000% returns. The best justification for what I have heard for buying these investment courses is the following.

So if I pay Rp 10 juta for the course, I just need to make back Rp 10 juta from ONE successful trade.

Then, the rest of the trades’ profits are essentially 100% mine.

P.s. If you commit to this logical fallacy, that’s okay. Virtually everybody who buys expensive courses have a justification of that nature. Otherwise they won’t pay an absurdly expensive course.

In case you do not see the fallacy, you are assuming that carrying out ONE successful trade that covers your tuition fee ensures that you would have successful subsequent trades. But the subsequent successful trades are NOT guaranteed to be successful at all. Heck, you might lose the initial Rp 10 juta you received from the first trade and your entire investing capital if you are not careful.

Let’s use an analogy. If Magnus were to sell you a chess course for a suuuper expensive price and he says that “you will play like me”, you probably would be enticed and buy it. When you take the $10,000 chess masterclass course, he will share with you his secrets in understanding the chess game better. But after you learn his secrets, you realise that your chess did get better. You probably would learn how to play good openings principles. But still, when you go against better players, your lack of experience will cause you to make unforced errors (blunders) and cause you to lose your subsequent games.

To me, it is a no brainer that after you take a Magnus Carlsen course, you are likely to still be way worse than him at chess. Only when you put in the effort and time to be like him, then your ability would get closer to him.

Well this explanation, very much applies to investing… At this age of open information and technology, I think it is common knowledge that investing is also a skill, that needs to be honed and developed. You can buy the course to learn the skill, but you unfortunately cannot buy the skill. You have to practice it.

Setting up a premise: Let’s get back to investing. What does it mean to underperform?

But what then is being bad at investing? I mean in chess, you are bad if you keep blundering and losing your games. In investing, you are bad if you keep underperforming. But what is underperforming? Especially if many do not count floating loss as a loss and count realised profits as profits. If that’s the case, then everybody is good at investing. Which then means that no one really is.

Furthermore, much of investing unfortunately is not transparent. You cannot demand a person’s investments track record and measure it down to the T. Especially when the quest of this article is to figure out your friends’ investment performance. Such financial data is often private and sensitive.

Therefore, let’s get to the basics and define underperformance. You underperform if:

You hold on to your losers too long. You sell your winners too early.

Why do we set this definition as baseline?

We set it based on established knowledge known as The Disposition Effect that is well documented in academia. The Disposition Effect states that individuals become risk-seeking in the domain of losses. And the become risk-averse in the domain of gains.

It is important to note that this behaviour feels most natural to people.

For example, when you start playing chess, what feels natural is to blunder (forget that a piece is not protected when you make a move). In investing, the most natural tendency is to hold on to your unrealised losses and to trim your profits too early. As a matter of fact, a skill refers to your ability to overcome this natural tendency. The better you get in the said field, the better you are in overcoming this natural tendency.

What happens to a person during a floating profit

Research says Risk Aversion in Gains: In the domain of gains, the utility function is concave which causes investors to have the disposition to lock in profits early (selling winners) to secure the gain.

You can see from the figure above that the marginal utility for every $ gained, becomes smaller and smaller.

Imagine when you first bought a stock and that stock rallied 100%. That’s an awesome feeling. What Prospect Theory is saying is that:

• From 0 → 100%, the gains feel hyper amazing.

• From 100% → 200% feels amazing too, but less so compared to the initial 100% gain.

In other words, the 1st bagger might end up giving the same happy feeling as the next 200% leg up to your investments. Which is why, people tend to be more risk averse and tend to feel the urgency of taking of their profits early.

And what is the feeling that a person gets after realising their profits? Pride.

What happens to a person during a floating loss

Research says in the domain of losses, the function becomes convex. This convexity implies that individuals become risk-seeking when faced with losses. Rather than accepting a “paper loss” by selling a declining asset, an investor prefers to hold the stock—effectively engaging in a gamble with 50-50 odds of breaking even or losing an additional amount

You can see from the figure above that the marginal sensitivity for loss of every $, becomes smaller and smaller.

So let’s say that you bought a stock and it goes down by 10%. It feels super terrible.

• From 0 → -10% the loss is acute

• But from -10% → -20% the loss is less acute and more numbing.

• From -20% → -30% maybe it doesn’t feel anything anymore.

But that is why people have the natural tendency to ride their losses. Because the function is convex, if you are given the option:

• 100% chance you realise the -10% loss OR

• 50% chance you realise -20% loss and 50% chance you realise 0 loss

You will take the second option. Because 10% loss for certain feels more painful than the 50-50 chance of 20% loss and no loss. Although, the expected value is the same: -10%.

Intuitively speaking, people operate in wanting to minimize this very feeling of regret. Which is the negative counterpart of pride.

So What

So the natural tendency of an inexperienced investor is as follows:

• In the case of profits, they want to seek pride as quickly as possible

• In the case of losses, they want to proooloooongg regret as much as possible.

The more you conform to this natural tendency, the worse your investment performance. Also interestingly enough, when you conform to this natural tendency, your behaviour is often observable:

• In coffee shops with your friends

• In your office

• In family reunions

Conjecture:

The way people converse about their investments reveal information about this behaviour and therefore, allows inference about their investment performance.

Note this is Toby theory. I have not seen an academic paper discussing this because I am not an academic. But I will be very happy to see if there’s a paper that discusses this more formally.

Hopefully this makes sense.

Again, the logic is simple:

Well-documented cognitive biases shape how investors react to gains and losses.

Those reactions lead to systematic underperformance.

And the same reactions show up in how people talk about their investments.

Which means:

by observing how someone talks about investing, you can often infer how well—or how poorly—they’re likely performing.

Without further ado, let’s go to the behaviours that allows you to infer your friends’ investment performance :)

Behaviour Symptom of Investment Underperformance #1: Boasting that one successful trade during family dinners or friends gathering

Pay attention to the way they boast it.

Do they simply quote a percentage gain?

Do they mention the size of the position relative to their total portfolio?

For example, if my dentist friend says:

“Hi Toby — I got 50% profit from stock A!”

I’d say congratulations. But I’d also form a reasonable belief that this investor is likely underperforming, for two reasons.

Number one, the are likely selling winners too early to secure pride. Boasting about gains is often less about returns and more about locking in pride.

As demonstrated in the previous section people’s natural tendency is to be more risk-averse in the domain of gains. Once a gain exists, the dominant impulse is not to maximize expected value, but to protect the emotional payoff of being right.

Essentially, selling early turns paper pride into realized pride.

This behaviour is observable because the investor highlights the gain before discussing its role in a long-term plan. The excitement isn’t really about compounding — it’s about getting validation from people around you. Which unfortunately in practice, this might mean:

• Premature profit-taking

• Truncated upside on the best ideas

• A portfolio where winners never get the chance to meaningfully drive returns

Over time, this can systematically drag performance.

Number two, talking about stocks individually signals mental accounting. Notice what’s missing in the statement “my stock A is up 50%”:

• There is no mention of position size, hence

• there is also no mention of impact of stock gain to overall portfolio performance

The stock is being evaluated in isolation, not as part of a portfolio, which is consistent with mental accounting.

Hersh Shefrin and Meir Statman describe mental accounting as the tendency for decision-makers to segregate gambles into separate mental accounts, rather than evaluating outcomes at the portfolio or total-wealth level.

When a stock is purchased, a new mental account is implicitly opened. Gains and losses are then tracked relative to the purchase price, creating a “scorecard” for that individual position.

So when an investor discusses stocks one-by-one — instead of contribution to total portfolio returns — they are verbally revealing this segmentation.

The problem is that:

• Portfolios outperform, not individual stocks

• If the size of the outperforming stocks is negligible to the overall size of the portfolio, then an investor should not be happy with merely a 50% increase. They should be demanding a 1,000% or a 10,000% increase for their investment bet. Hello Venture Capital.

Mental accounting breaks this integration, leading to sizing based on feelings, suboptimal profit taking times, and therefore poorer long-term outcomes.

Behaviour Symptom of Investment Underperformance #2: Getevenitis

Let’s say you are aware that your friend was super fired up about stock B and held it. Then you know that stock B plummets in value -50% since you last spoke with them. So you ask them with the intention to pique their take about the prospects of stock B

How’s your investments?

Then your friend would say:

Investment is fine. I’ll keep stock B for the time being. I believe it will go back up to my original buying price.

So essentially your friend is betting that stock B is going to double from this current price point. But hold on a sec, you can then ask your friend again:

What makes you think stock B is going to 2x from its current price?

If the answer is somewhere along the lines of:

• I am not sure

• My friend told me so

• My broker told me to just keep it

Then we are seeing a behaviour that is often referred to as “get-even-itis” — a condition that has brought more destruction on investment portfolios than almost anything else. Logic as follows:

• The original purchase price becomes a psychological anchor

• Returning to that price feels like “undoing the mistake”

• Selling below it feels like locking in failure

So instead of asking, “Is this the best use of my capital today?”, the investor asks, “Can I just get back to even in the unknown future?”

The tragedy is that positions don’t have to recover. They drift sideways, or worse, decline further — all while capital remains trapped. Although this sounds grim as it is not an ideal condition, we have written a systematic step by step to recover an investment portfolio.

But again, this psychological anchor and the reducing marginal pain of losing one more unit of investment, causes a risk seeking behavior. Essentially, you are willing to make an aggressive bet with your capital that stock B is going to double from today. Therefore, if you notice getevenitis, then you are likely having a conversation with an investor who’s underperforming.

Behaviour Symptom of Investment Underperformance #3: If only I knew this or that (Taugitumology)

Everyone can make predictions about the future. But everyone also doesn’t know what the future will be. Being an investor does not make you a soothsayer.

Being a good investor means that you can make calculated bets based on the information you have today about what the future is going to be. But it is impossible to be correct all the time. So if a conversation with your friend goes something like:

If only I knew Trump would strike Venezuela

If only I knew MSCI would reassess Indonesia’s free float visibility

If only I knew that silver price would go to $100

Well, what you’re hearing is not analysis. You’re hearing regret.

These are events that, by definition, could not have been known in advance without privileged access. And even if you somehow had an insider to Trump, you certainly wouldn’t have one to Xi Jinping — or every central bank, regulator, and commodity cartel in the world.

That’s simply how information works. Markets move not just on public data, but on decisions made behind closed doors.

What “if only I knew” actually signals

The phrase “if only I knew” is the verbal expression of regret aversion. Hersh Shefrin and Meir Statman define regret as the emotional pain that comes from realizing, after the fact, that a different decision would have led to a better outcome.

The problem is not that regret exists — everyone feels it. Yes, including me and Budi. I happen to sell my silver stack at a $38. Does regret come about? Yes, very much so. Buut the problem is over-attachment to it.

When an investor constantly evaluates outcomes in hindsight, two things usually follow:

1. Decisions become ex post, not ex ante

   Instead of asking, “Was this a good bet given the information at the time?”, they ask, “Why didn’t I predict the outcome?”

2. Process gets replaced by storytelling

   The portfolio is no longer governed by allocation rules, probabilities, or expected returns — but by emotionally charged narratives about missed events.

This is why “if only I knew” is often a sign that the investor does not have a clear investment process.

Which repeated overtime, would most likely cause underperformance. I have yet to see the very few lucky individuals who don’t have an investment process and can generate a stellar long term investment performance.

Ultimately, 99.9% of people are playing status games

Being seen as good at a skill that is associated with intelligence feels incredibly satisfying.

We admire people who are good at chess because chess is perceived as a proxy for intelligence. The admiration is immediate. Think about the legends of chess like Gary Kasparov, Magnus, Hikaru. You won’t think that they are not intelligent.

Well investing sits in the same category.

If you are perceived as “good at investing,” the reward is instant:

Admiration and validation of your intelligence.

And if you happen to guess correctly, the feedback is fast. People notice. They listen. They ask questions. Which becomes a quiet boost to your social status. You are seen as the intelligent one in the dinner table with plenty of opinion.

The irony

I believe that the behaviours that maximize short-term validation seem to be the same behaviours that has the potential to destroy long-term performance.

As a society, we are trained to reward displays of intelligence. So investors naturally gravitate toward:

• boasting about a single winning stock,

• highlighting recent gains,

• referencing dramatic events they “almost predicted.”

These make for good stories, but not a good sign for portfolio performance. Ironically, the investors who talk the most about being right are often signaling:

• pride-seeking over compounding,

• hindsight over process,

• emotion over discipline.

In other words, the conversation itself becomes a diagnostic tool of some sort.

Closing Remarks

All this, I am definitely not saying that the person who exhibits this behaviour is stupid. It means they are human. I exhibit these behaviours too. I myself have my own ego. I have made investing mistakes in the past and I am quite sure I will make them again in the future.

But all this while, at least I have learned that in investing, playing the status game can be expensive.

The skills that lead to admiration in conversations are not the same skills that lead to wealth accumulation over decades in the market.

So instead of focusing on the fleeting admiration I get on my dinner table, I’d like to remind myself to focus on the actual improvements to processes that would contribute to long term profitability.

Cheers.

Ooops

Before you go off for real. I want to hear from you. What do you think are the behaviours you commonly see at your dinner table, friend gathering, etc that potentially displays a person’s investment underperformance or superb performance?

I have a couple of ideas for the superb performance ones. People who are really really good at investing also exhibit a certain behavioural pattern that you could identify. Let me know your thoughts in the comments.

Leave a comment

Toby just released a blogpost talking about Recompound’s performance in 2025.

A tiny minority of our clients are concerned, we didn’t beat the index (IHSG) in a calendar year. We did 18% (roughly 14% after fees), while the index did 22%.

But honestly? I’m not concerned.

If you zoom out and look at the performance since we started in August 2022, the picture looks very different. Here is the track record of our very first client — who happens to be Toby’s own Aunt (shoutout to Tante!):

(Note: Performance varies depending on when a client joins, but this is the “OG” benchmark).

We are sitting at a 97% cumulative return vs the index’s 19%.

We are doing just fine.

The Parallel Multiverse

To explain why I’m not losing sleep over 2025, let’s look at a “Parallel Multiverse” version of Recompound.

In this universe, there’s a second version of us. Let’s look at their numbers:

Look at that 2025! They didn’t just beat the index; they basically 1.5x-ed their customers’ money in twelve months. Their cumulative return is also 97%—exactly the same as ours.

Most people would see that 146% and scream, “Sign me up!”

But here’s the reality: That second version of Recompound would have gone bankrupt in 2024. No client is going to stick around after watching their portfolio drop 13% one year and another 20% the next while the market is relatively flat. They would have fired us long before that “miracle” 2025 happened.

This goes back to our core philosophy:

Our objective is not to have the highest returns in a single year.

Our objective is consistency and, ultimately, peace of mind.

The Power of Being “Above Average”

There’s a famous memo by Howard Marks called Fewer Losers or More Winners.

In it, he tells a story about David Van Benschoten, who ran the General Mills pension fund.

For 14 years, the fund’s returns were never “top tier”—they usually ranked in the 2nd quartile (better than average, but not the best). But because they were consistently in that 2nd quartile and never had a “blow-up” year, where did they rank for the full 14-year period?

The top 4th percentile !!

As Marks says:

”Most investors aiming for top-decile performance eventually shoot themselves in the foot.

Why? Because when people blow up, they really blow up… but David never did.”

That’s why I’m not concerned.

By avoiding huge drawdowns and staying consistent, we provide something much rarer than a “hot year”:

We provide a portfolio you can actually sleep with (not in the way you’re thinking of).

The “McLaren” Trap

We know right from the start Recompound isn’t for the mass market.

Most people are easily distracted by short-term “outperformance.” They see social media influencers “flexing” sport cars and luxury lifestyles, claiming they made 500% in a week.

What these influencers don’t show you is their consistency (or lack thereof) and how many times their portfolio went to zero before they got that one lucky screenshot.

And more importantly, they don’t show you the “bracketed” reality.

In reality, the formula is more like:

1. Pay some exorbitant amount of tuition fee

2. [Do a crazy amount of work and spend years acquiring the taught skill]

3. Buy McLaren

Most of our clients have full-time jobs or run successful businesses.

They don’t have the time (or the desire) to do the “crazy amount of work” in those brackets. They want their money to grow steadily while they focus on their own lives.

Transparency is a Feature

The final reason our clients stay with us—some for three years now—is transparency.

We don’t hide when the market is tough. We stay in the trenches with them.

Every single client has their own dedicated WhatsApp group with us.

If they’re feeling nervous or need some “penguatan iman” during a market crash, we are right there to explain our conviction.

That trust isn’t built on flashy marketing; it’s built on 1-on-1 communication and being easily accessible just 1 WhatsApp away.

Let’s Conquer 2026

If you’re looking for a “get rich quick” scheme, we are not the right fit.

Our approach is built for a different kind of investor.

We are for those who value Consistency, Transparency, and Peace of Mind on their path to retirement.

This strategy is less about market noise and more about a foundational investing mindset. If you share this perspective, you might find value in an article we wrote on this exact topic: “The Right Mindset to Equity Investing.”

2025 was a solid year of building. We stayed the course and kept our clients’ portfolios healthy.

Now, let’s go and conquer 2026 together.

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2025 is a crazy year filled with turmoil and sagas. Not only the events that you and I would hear on the news, but it is a year full of transition. Amongst many, is my older brother. He’s one of the few inspiring figures for me growing up. Primarily with his stellar academic achievements, obtaining full ride scholarships to Singapore and then to the US for university.

But now, he is going through the trenches of his entrepreneurship journey and starting his own business. For the first time since forever, I would see a car at the porch of the office when I arrive in the mornings.

No, not because Budi comes earlier to the office than me :) but because my brother is already there, getting to the office earlier than me.

I have also seen him setting up social media, website, kitchen, inventory, and many more that reminded me of the suuper beginning early days of Recompound (although Recompound is still early as this post was built). It is hard. Not hard because the tasks are inherently hard, but mainly because of the number of decisions, the uncertainty, and the persistence needed to go through failures when setting up a business.

I am grateful that I am in a unique position who’s actively building a business for people like my brother (yes he’s a client). Budi and I also happen to look at businesses actively, how they are run, how they operate, how they grow and develop moat as part as the core product we offer.

So I’d like to take this opportunity to share 25 lessons that I have learned in 2025. More of like a pep talk for my brother, which you could also access. I genuinely hope that you could use it as an opportunity to reflect on your 2025 (the data that you have) to allow you to be a better version of yourself in 2026.

Oh and I recorded myself on YouTube, explaining the points. So this post only contains the points. If any of those interest you, go on to the video to learn more.

Go to the video

To my brother, here are some lessons that I learned in 2025. I genuinely hope that you will find some (at least one) of them valuable:

1. Levels to this game

2. Intellectual honesty is hard

3. Value is action

4. Social media is not a popularity contest

5. Investments is a lot more broad than you think

6. Logic is limited

7. Language is also limited

8. Quality is more important than quantity

9. But quantity is more important than quality

10. Financial freedom might be the wrong goal

11. Macroeconomics is BS (mostly)

12. Nothing is truly 0 risk

13. Possibility sells, probability confuses

14. In the 21st century, being smart is equals to being stupid

15. It is never about the achievement, it is about progress

16. Comparison with others is inevitable

17. Luck is a requirement

18. Proper system beats motivation

19. Knowledge is a commodity

20. Being a specialised generalist is important

21. People will not quit smoking because smoking kills

22. People quit smoking on their own accord

23. Being a non-conformist is tough

24. Work is invisible

25. It’s okay to set an absurdly crazy goal

Also to you our dearest reader, happy holidays, may you have an enjoyable time with your loved ones.

Disclaimer: Not financial advice, this content is about having conversations about finance for educational purposes only as a source of reflection. When in doubt, always contact your trusted financial advisor or financial planner. If you use the AI prompt below, be sure to be aware that AI can make mistakes. Ensure that you read the content carefully and if there are things that do not make sense, go back to your financial advisor or financial planner.

Talks about finance and wealth is something that seems to be a taboo, not only in Indonesia but perhaps globally. It is indeed a sensitive topic to discuss because our perception about money can be different from one another. One might feel that money should be safe guarded at all cost, others might not want to talk about money at all (avoidant) and want to focus on enjoying life. Talking about money becomes a huge chore and a hard conversation that few want to have unless absolutely necessary.

Furthermore what’s commonly observed

is that there is a group of people who’s the breadwinner to support the financial life of generations above and generations below (sandwiched). Although there are multiple stakeholders, conversations about finance and money might remain absent.

Imagine you have a WhatsApp group with your family:

• Alex (breadwinner wants to get promotion)

• Bob (father wants to buy a new fridge)

• Carol (mother wants to go to the dentist)

• Dalton (grandfather wants to do a medical check up in Penang)

• Emily (grandmother wants to take yoga classes for her wellbeing)

• Money (Alex’s wallet)

Alex financially supports the wants of B, C, D, and E. But Money is never really in the picture although Money is the ultimate decision maker as to whether the wants of all family members can be fulfilled or not. Because if there’s not enough money, Dalton might not be able to have a medical check up in Penang.

What’s worse, even when Alex couldn’t afford it with his income, he might end up unknowingly take up a tad bit too much debt. And… none of his family members would be aware that Alex is in trouble.

But why?

Why do we seldom talk about something that is as essential as money. Or at least every participant who has their financial need supported by another person might want to have a transparent picture of Money in the WhatsApp group.

I am very lucky to be able to have a nice conversation on

How to talk about finances to our family

with one of our customers, Rico. This is especially important for people who supports multiple generations’ financial needs who might want to look for ways to talk more openly and safely about money with their family.

It is barely scratching the surface about the topic but the video gives a good idea about where we can start. Enjoy!

Also, this is why the video might matter to you as a long term investor

Most people think investing is about returns.

But in reality, your financial outcomes depend on:

• your relationship with money

• your family’s relationship with money and their expectations on you

Your portfolio might have a hard time growing if a lot of your energy—mental, emotional, financial—is used to patch invisible holes at home.

Clarity and honesty protect not just your balance sheet but your well-being. So hopefully it would be of value.

For those who like to read

you can always get the show transcript from YouTube, and copy paste it in to ChatGPT or your favourite AI tool (I tested the prompt with the free ChatGPT model) with the following prompt:

“““

You are an editor and writer helping me transform a raw YouTube transcript into a polished blogpost.

The transcript is a conversation between Toby (host, Co-Founder of Recompound) and Rico (guest, customer). You do not need prior knowledge about Recompound—everything needed is described below.

Your Tasks

When I paste a transcript, you must:

Rewrite it into a complete, polished blogpost

Use this style guide to frame the writing:

• Tone: calm, reflective, long-term, psychologically aware, non-hype, data-driven but simple.

• Audience: busy professionals & entrepreneurs looking to improve their investment mindset.

1. Clean the transcript

Remove filler words like “uh”, “you know”, “like”, “kan”, “ya”, “basically”.

Remove repeated sentences, cut irrelevant small talk, and re-organize ideas so they flow logically.

2. Turn messy dialogue into a coherent narrative

• You don’t need to preserve conversational format.

• Convert the scattered points into a single-voice essay.

• Attribute ideas subtly (e.g., “Rico shared that…” or “As Toby explained…”).

• Keep only the most valuable segments.

3. Preserve the wisdom, not the wording

Use the transcript only as source material, not as literal sentences.

Rewrite everything into clean, professional, simple prose that fits the Recompound editorial style.

4. Deliver output in this format:

Title: (5–10 words, reflective, non-clickbaity)

Subtitle: (one sentence framing the insight)

Body:

• Opening hook (2–4 sentences)

• Body sections with clear subheadings

• Actionable takeaways (bullet points)

• Soft CTA:

If you want to improve your decision-making and long-term investing approach, you can explore more of our writings at Recompound.

When you’re ready, tell me:

“Paste your transcript below.”

“““

Closing remarks

Still here? I am curious about how you’d find the video or the ChatGPT summary, schedule a call with us if you have food for thoughts or just want to have a safe space to talk about finance.

Get in touch

If you want to know more about us and our work,

Click Here

Hi 👋 welcome to Recompound Blog - The Investment Mindshift. We help you better your mindset on investment and economics one article at a time. More: Our Values | Advisory | Get to know us | Picks | YouTube

Remember guys, not financial advice. But hopefully it will be a post to help you think about the topic more deeply if you haven’t already :)

Today is a longer blogpost, so maybe set aside about 30mins to 1 hour to truly read and absorb the ideas. Or read it multiple sittings is also fine.

Before you bash me, hear me out.

Devils is in the details and you will understand my argument when you read the entirety of the post 🙂

I honestly feel that “financial freedom” has been the holy grail of many people, not just in Indonesia, but globally. Many seem to want to earn that FU money and retire early. Manifestation would involve side-gigs, speculating in the stock market, cryptocurrency or other high risk assets.

But I am arguing that chasing financial freedom is commonly misunderstood and could be potentially one of the most dangerous ideas of our time. Especially when we see patterns of people achieving financial freedom too early often collapse.

Let’s take a look at football players

It is an extreme group of people. But understanding such phenomena can we grasp the potential pitfall of naively chasing financial freedom.

So a Premier League player (you got me I am a Man Utd fan) on average earns £35,000 per week — roughly £1.8 million per year. Even with a short 5-year career, that’s £9 million in earnings. After expenditure and taxes, maybe £4 million lands in their pocket when they retire.

At a 5% annual return, they could live on:

£200,000 per year — forever.

That’s pure financial independence for 99% of the people on the planet before hitting the age of 30. Yet the data according to BBC is quite shocking:

2 in 5 players go bankrupt within five years of retiring.

This is not even within the life time of the player. You give them 5 years and 40% of them go broke. Let that sink in for a moment. Now you can imagine if a sizeable portion of the population of working adults get to financial freedom but a good chunk of that free people end up broke then depressed. That’s a problem.

Clearly lack of money is not an issue here. You might be thinking that there’s something psychological:

• They live very luxurious lifestyle

• They have no financial education

• and more

I don’t buy these arguments as it is too simple. Premier League footballers might be one of the toughest nuts you could find on earth. They are not just talented, but level of discipline, focus and intelligence need to also be there. Otherwise they won’t be playing in the Premier League.

Need to learn financial literacy? I don’t think they are stupid enough, especially when resources is that abundant. You could literally go on to YouTube and educate yourself about finances. You could even hire a financial advisor to help you do investments in the financial market while you focus on other areas of life.

Need to stay away from flashy lifestyle? If they could be disciplined in preparing for matches, I also think that discipline is transferrable to many areas of life.

So it seems that the issue of professional footballers getting broke goes deeper than those superfluous explanations. I think it is biological. We’ll talk about dopamine next.

The Molecule That Drives Your Entire Life

Most people understand dopamine as the molecule that drives pleasure. That’s not entirely correct. According to Dr. Andrew Huberman of Stanford Medicine, dopamine is the molecule of pursuit, craving, motivation, and forward movement — not pleasure.

It is released when you:

• work toward mastery

• improve at something

• anticipate achievement

And here’s the first crucial insight that is the most important thing for you to remember today:

Dopamine is the chase, not the reward. Pleasure is what comes after — from other brain chemicals.

Dopamine is what drives you toward the thing in the first place.

That cute girl in the office that you see (if you are single of course), you might want to get her number. That’s dopamine.

Now Huberman explains that dopamine exists in two forms:

• baseline dopamine = your daily sense of motivation

• peak dopamine = short bursts when you achieve something, win something, or get excitement

You can imagine it as a pool filled with water. Baseline is when the water is relatively still. Peak is when there is a wave in the pool, which will create an inevitable crash (level below the baseline).

• You experience a dopamine spike (peak).

• Immediately after, dopamine drops below your baseline.

• Then baseline gradually recovers to its original level…

Now here’s the important bit - your baseline level determines your motivation

The lower the baseline, the lower the daily motivation. And according to Huberman, this baseline could be lowered by a crazy crash from peak dopamine.

How do you have a crazy crash? Consumption that causes a steep rise to the peak which is followed by a steeper crash. This causes the “water” to be taken out from the pool and the resulting baseline would decrease.

What kind of consumption?

• gambling

• drugs

• alcohol

• you know

But why consume? Again, because the feeling of not having the pleasure, below the dopamine baseline level is pain. We do not like pain so we are compelled to do things to get rid of it. And consumption is a magical and temporary cure that allows us to get rid of that pain and go for those peak dopamine levels.

But why consuming indefinitely is a problem?

Law of diminishing marginal returns

In economics, the more you consume something, the less joy you get from each additional unit of consumption.

• The first ice cream is amazing.

• The tenth is bland.

• The eleventh? You might want to pay a mukbang person to eat it for you.

So imagine you getting your financial freedom today. And you have said to the world that you are going to be a foodie that hunts for new hidden gem place every day.

Year 1 of being a foodie feels incredible. You get to try hidden gems, all sorts of cuisine

Year 2 not so bad.

Year 10. Maybe eating food would already stop giving you that same pleasure you initially started.

Year 30? Maybe you just want to eat home cooked food.

The worst part is that once you’ve realised that your life is miserable after so many years of consumption and you want to return to productive work, the inertia will be that much bigger and harder. Because it so happens that consumption gives you that comfort that also blunts your skill.

So let’s tie everything together sequentially to show the sync between neuroscience and economics. Most people chase money, imagining that once they “arrive,” they can sit back and consume forever. I’d argue that this is a dangerous idea.

1. Money → enables consumption. Once you arrive, you think you can buy anything.

2. Consumption → creates dopamine peaks. Every indulgence gives a short-lived spike (food, luxury, gambling, entertainment, etc.)

3. Dopamine peak → triggers a crash below baseline. After every peak, baseline dopamine drops temporarily.

4. Crash → generates pain. This is the “post-high emptiness” Huberman describes.

5. Pain from crash → compels more consumption. Brain thinks: “consume more to fix this pain” but that reinforces the problem.

6. Repeated consumption → deeper baseline depletion. The readily releasable pool of dopamine becomes depleted. Baseline takes longer to recover. Joy becomes harder to feel.

7. Lower baseline → lower drive, lower motivation. Huberman explicitly says: Low dopamine = low motivation, low excitement, low desire to engage.

8. Lower motivation → life feels depressing. This is why footballers, lottery winners, and retired athletes often spiral downwards.

9. Lower motivation → makes more consumption feel like the ONLY escape

And…. more consumption need? More money.

The worst part is consumption can deplete baseline which becomes a self-destructive loop:

money → consumption → peak → crash → pain → more consumption → deeper crash → lower baseline → lower motivation → more consumption → financial ruin

In other words, consulting law of diminishing marginal utility, “pleasure” you get from the same type of consumption activity diminishes as you get more of it. You’d want more to consume more extravagantly to “make up” for that dopamine crash.

it becomes either:

• you spend more to consume more stuff OR

• you feel pain and misery because of dopamine crash that is returning to baseline levels

Either way it is unsustainable. But this is not a doom and gloom blogpost that offers no solution. I think it’s good for you to achieve financial freedom by focusing on production that you genuinely enjoy.

How about production?

Now compare consumption with production.

When you produce — when you build, create, solve problems, serve others — something completely different happens:

• Your skill compounds.

• Your reputation compounds.

• Your relationships compound.

• Your impact compounds.

• Your fulfillment compounds.

• Your identity strengthens.

• Your dopamine becomes sustainable.

Economically and neurobiologically, production is self-reinforcing:

The more value you create, the more dopamine-rich the process becomes — and the more value you are capable of creating next.

It has a compounding effect.

This is the opposite of consumption.

Think of:

• a chef whose dishes improve every year

• a writer whose clarity deepens with every essay

• a coach whose players grow season after season

• an entrepreneur who builds something thousands use

• an investor whose circle of competence compounds

These people feel more alive the more they pursue their craft. Their dopamine is tied to effort and progress — exactly how the brain is designed to function. This is why many peak performers are happiest not at the destination, but during the years they are building toward it.

But there’s a catch: you can only produce indefinitely if you enjoy the process

You can only sustain production and enjoy compounding dopamine if you genuinely enjoy the craft itself.

If the work energises you, if the pursuit itself feels meaningful, if the effort feeds your dopamine instead of draining it:

• you don’t burn out

• you don’t need to escape

• you don’t collapse after milestones

• you don’t chase consumption for stimulation

• your sense of meaning grows richer with time

This is why some people can work joyfully for decades while others burn out in two years. The joy of the process is the fuel that makes compounding possible.

So..

1. the better you get, the more valuable you become

2. the more valuable you become, the more people you can help

3. the more people you help, the more meaningful your life becomes

4. the more meaningful your life becomes, the deeper your dopamine reservoir

5. and the deeper your dopamine reservoir, the more motivation you have to create value (going back to point 1)

This is the compounding loop of a meaningful life. And the money?

Money becomes the by-product

You don’t need to chase it because it is pulled toward you by the value you create. And you will create that value because the work itself feels intrinsically rewarding. Not because you’re forcing yourself, but because your brain’s dopamine system is aligned with the pursuit.

Closing remarks

Some food for thoughts for the weekend if you are reading this on a Friday. Are you chasing financial freedom and early retirement because you truly have something that you enjoy doing and pursuing that is of value to other people? Or is it largely because you want to consume for the entirety of your life? Or is it because you are simply working with the wrong people that you no longer enjoy your work?

If its a people problem, but you enjoy your work, means that you will need to figure out to clean your environment up :) or relocate to a better one. Either way, financial freedom is likely to not be the answer. Chasing it naively as this essay has explained can be dangerous.

So instead of chasing financial freedom, why not chase productive work that you truly enjoy and could do indefinitely? Financial freedom then comes as a bonus, a by-product of that.

Hi 👋 welcome to Recompound Blog - The Investment Mindshift. We help you better your mindset on investment and economics one article at a time.

This is a continuation to the article navigating Indonesia’s Investment Terrain. One sentence summary:

Being a working adult in Indonesia is hard especially if you want to accumulate wealth. The only options available seem to be short term in nature. Chasing hype, gunning for returns, etc.

What to do..

And the problem is so real that it is also felt by many of our clients. One of them is Sherwin.

If the image is not clear enough, here’s what he asked:

“hey guys, curious to hear your thoughts on this if you have the time. I’m not a professional investor or trader but I’m learning and observing markets and wisdoms in stocks, crypto, etc so I’m putting on my curiosity hat here.

So, lately I’ve been noticing my instagram algo pointing me towards a few stock players, large following, who’s been making large gains in the past 2-3 years (probably from those conglomerate stocks). For example, someone made 280% gain in 4 months and this person was rewarded by KB valbury for exceeding trillion rupiah transaction value.

Now, seems like some of these people are still quite new to the trading market i.e since covid but they are defying conventional wisdom (where 20-30% per year return is already good) and trying to target billions in gains or 3x-5x-10x return.

I’m wondering if indonesia stock market is just an entirely different market where conventional wisdom we see in books (typically targeted for US stocks market) don’t necessarily apply or there’s something fishy going on here?

My gut tells me that it’s a mix of luck, speculation, and timing and they’re using this to get people to buy their classes”

This is a very good question that is not easy to answer

Because we don’t know two things:

1. How lucky is the influencer in question

2. How skilled is the influencer in question

And therefore, how legitimate is the influencer in potentially bringing or inspiring returns for their followers. But aside from individual brilliance, there’s another layer to the question:

if we play it right in Indonesia, we could “3x-5x-10x return”. And this potential returns is unique to Indonesia.

I will answer the easier question first: is Indonesia unique as a market to bring in crazy returns?

No, I don’t think so. There’s a possibility of getting crazy returns in virtually any market given extreme individual brilliance or extreme luck. Even in the slow, boring Japanese market, if you all in on MUFG stock in late 2023, you would more than double your investment by early 2025. And MUFG is not a penny stock, it is a large cap company.

But did you all in on MUFG? Probably not.

But there might be someone in Japan who did. We don’t know.

That person in Japan might attribute his investment success on MUFG doubling to their luck and/or individual brilliance. And here’s the thing:

Possibility sells. Probability confuses.

In Daniel Kahneman and Amos Tversky’s seminal 1979 paper, “Prospect Theory: An Analysis of Decision under Risk,” they explained a powerful, predictable pattern in how humans make decisions under uncertainty.

It really was not about complex math, but a simple psychology. They presented subjects with two choices.

Problem 1: The High-Probability Choice

In this scenario, the odds of winning are substantial.

Overwhelmingly, people chose B. The near-certainty of winning $3,000 felt much better than the riskier, coin-flip chance at $6,000. When the probability of winning is high, we become risk-averse. We prefer to lock in the more probable, although smaller, gain.

Now, watch what happens when the context shifts.

Problem 2: The Low-Probability Choice

Go ahead. Take your time to choose.

…

…

Now most probably, you’d choose C. I mean I would choose C too. But here’s the thing.

Mathematically, Problem 2 is just Problem 1 with all probabilities slashed by a factor of 450. A rational person’s preference shouldn’t change. But it does.

Again in problem 2, an overwhelming majority of people flipped their choice and picked C.

Why? Because when probabilities are minuscule, our brains stop processing them logically. The difference between 0.1% and 0.2% feels irrelevant. Both are just “long shots.” or “mere possibilities”.

So our brain focuses entirely to the prize.

The decision-making process becomes:

“Well, if I’m going to get incredibly lucky anyway, I might as well get lucky and win the big prize.”

This is the Possibility Effect. We don’t value tiny probabilities linearly; we massively overweight them. The simple shift from 0% (impossible) to 0.1% (a possibility!) is a huge leap in our minds. To repeat, it is the change from 0 to 0.1% that our brain processes, not the concrete 0.1%.

0 → 0.1% is a big change!

0.1% → 0.2% is meh of a change.

Although mathematically, the magnitude of the change is equal. Now that right there is the psychological engine that powers the entire lottery industry.

The Influencer’s narrative to turn their success story into yours is “Problem 2”

Again, I am not saying that influencers are fraudulent (although probably some really are just insiders). But even if they are really that brilliant, their success story translated to your success story is a mere possibility.

Remember, it is not about the influencers that are smart or highly skilled. It is about you.

When they show you their portfolio, they aren’t offering you a 90% chance of making a safe 15% return. That’s boring. That’s probability, and probability is confusing.

Instead, they are selling you a “Problem 2” scenario. They are selling you Possibility.

They are implicitly presenting you with a choice:

• Option C (The Influencer’s Path): A tiny, undefined possibility of a 10x return.

• Option D (The Recompound Path): A less tiny, but still small, possibility of a 2x return.

So here’s why are you drawn to Option C: Influencer Path

Implicitly, I have mentioned that Influencer (Option C) and Recompound (Option D) only offers a possibility. That is why you are drawn to Option C. A big prize: life changing money! but at a very small percentage. While the Recompound path is boring. 20% on a good year?? Skip.

That’s one reason. But I am arguing that there’s another more powerful reason:

You think that Recompound path only has a probability that is slightly higher than option C.

That is where we (operators of Recompound) disagree whole-heartedly with you.

We think that the probability of achieving 10%+ returns is much much higher than just a mere possibility of achieving a big prized money. So to us, problem 2 is seen as follows:

• C: A 0.0001% chance to win $6,000,000

• D: A 95% chance to win $3,000

But then, at what probability does it mathematically make sense for you to choose option D? 20%. Now, look at this:

• C: A 0.0001% chance to win $6,000,000

• D: A 20% chance to win $3,000

That 20% still looks very uncertain psychologically! It is worse odds than a coin flip. Although you’d argue that 0.0001% to 20% is a mega leap. But still, you’d focus on the prize. $3,000 looks like a joke compared to a life changing $6,000,000.

Furthermore, if the influencer does a very good job in marketing:

• Using Ferraris, expensive watches → it increases the payout

• Using smart jargons that you are quite fuzzy → it increases the perceived possibility

The next thing you know, the payout for influencers shift upwards and the probability for Recompound to be mathematically convincing enough for you needs to be doubled:

Just like in Kahneman’s experiment, your brain ignores the near-zero probabilities and fixates on the jackpot. The influencer’s success story, however rare, makes the 10x outcome feel possible. And that feeling is intoxicating enough to make you forget that the real probability of you replicating their success is likely closer to 0.001% than it is to 1%.

The influencer’s strategy less about financial education; it’s about exploiting a well-documented cognitive bias. They are selling lottery tickets disguised as stock market wisdom. They know, consciously or not, that the dream of a life-changing gain is a much more powerful motivator than an analysis of likely outcomes.

But what should you be doing then?

Well, for starters, you kinda need to consciously fight your own brain’s programming. That’s hard. So kudos to you if you’ve been doing it successfully overtime 🙂

Especially since you now know that bad influencers are framing their pitch as a “Problem 2” (lottery ticket) scenario, your job is to re-frame it as a “Problem 1” (risk management) scenario.

You have to force your brain to do what it hates doing: ignore the glittering prize and focus on the cold, hard probability.

Ask yourself these three questions:

1. What is the real probability of me losing? Don’t focus on the influencer’s win. For every one of them, how many people tried the same strategy and failed? 100? 1,000? If you conservatively assume a 99.9% failure rate, the choice is no longer about the size of the prize. It’s about accepting a 99.9% chance of a failed execution of an investment strategy.

2. What is the pain of that loss? Prospect Theory’s other great insight is loss aversion: the pain of losing hurts far more than the pleasure of an equivalent gain. The influencer only shows you the joy of winning. How about the loss? How bad does it sting? What happens if that investment does not work out? How does that really impact your life, your stress, and your future plans?

3. What is my certainty price? Instead of chasing the 10x dream, what is the guaranteed outcome you would accept right now? Would you take a guaranteed 6%? Or 10% return? over a 0.1% shot at 10x? If you’re honest with yourself, the answer is almost always less than 10x moonshot that is promised.

By deliberately asking these questions, you shift from the emotional, possibility-driven part of your brain to the analytical, probability-driven part. You stop buying lottery tickets and start making investments.

You will be minority

Let’s be honest. Very few people will read this article, even fewer will understand the argument (although if you read this, most likely you will understand the argument), and even fewer fewer will actually implement it.

Expecting everyone to fight their cognitive biases is like asking every smoker to quit cigarettes tomorrow after telling them that smoking causes people to get lung cancer. Logical yes, but it is not happening. Smokers love their cigarettes. It’s addicting. The same goes for the pull of greed, the promise of a quick jackpot, and the dopamine hit of a “hot tip”. They are addicting.

The financial market, especially on social media, is a terrain that thrives on this weakness. It wants a majority of people to keep buying lottery tickets. It wants them to chase possibilities, not probabilities. Why? Chasing possibilities, trading in and out every second the price moves is a good business if you earn from people’s trading activities.

But that’s the point. You don’t need everyone to be sober. Only you need to be.

By choosing to see the world through the lens of probability and risk, you are stepping out of the majority and joining a small, quiet minority. This group is really not looking for a miracle. This group looks for a small edge over and over and over again. We are not playing for a one-time jackpot (although a jackpot sometimes do appear and they are very much welcomed); but we are playing for replicable growth.

The good news is that this minority is where the real, lasting wealth is built. While the majority is busy chasing the next influencer’s dream, you will be quietly compounding. And overtime, you can take a guess who would finish strong 🙂

Closing Remarks

But this raises a critical question. We just talked about the majority “chasing the next influencer’s dream.”

How about your friends? Or that cool aunt who works at an investment firm? Surely it is alright to listen to them right?

Well, if you glean knowledge from them only, this means that you are doing social learning. And it can be dangerous… So let’s use mathematics to show its danger.

Danger of Social Learning

Understanding this mechanism is a step in protecting yourself against the madness of the crowd.

Fact #1: Most retails underperform against the market.

Fact #2: Retails underperform because they make preventable investing mistakes over and over and over again.

Fact #3: They make the mistakes over and over and over again because they don’t know that those are mistakes. They think that that is the norm. It feels right for me to behave this way with regard to my investments.

It’s really like us binge drinking coca-cola every day and we wonder: hmmm why is my bloody sugar level seem to be unhealthily high? Why am I pre-diabetic?

Is it because of the Coca-cola? It cannot be (sarcasm), I drink it religiously after my meals!

This is what I believe

If you become self-aware to recognise these mistakes,

1. You cannot unsee them

2. You will be better than 99.9% of investors who don’t know that they are binge drinking that coca-cola and wondering why they are pre-diabetic

Which gives you a natural competitive edge. And yeah (un)fortunately, only very few of you will take it seriously. But I don’t mind. Even if 1 person becomes more self-aware for what I have to share, I am already more than satisfied.

Do I expect everybody who are aware of these mistakes be really good investors? No.

Do I expect everybody to be shredded with 6-pack abs after they know that the secret to fat loss is calorie deficit? Of course not. There are still so many knowledgeable overweight people out there. Just saying facts here.

But I do wish that for those who do become more self-aware that at the very least that they will not commit the mistakes we are about to discuss. Again, if it is valuable to one person, the video has already served its purpose. Enjoy!

Hi 👋 welcome to Recompound Blog - The Investment Mindshift. We help you better your mindset on investment and economics one article at a time. More: Our Values | Advisory | Get to know us | Picks | YouTube

Announcement from Toby: we will be posting more regularly on YouTube as well. So if you are so kind, give it a visit. Only subscribe when you feel that we deserve one. Thank you for your continuous support!

Disclaimer: This post is for educational purposes and is not investment advice. Figures and stock ticker cited are point-in-time snapshots that change frequently. Past performance does not guarantee future results. Index data and third-party sources are believed reliable but not guaranteed.

Same FOMO, New Story—Why “This Time Is Different” Still Hurts the Same

We didn’t set out to write a gloomy post. But the truth is personal.

Among our own families and friends—including people close to both of us (Toby & I) — many were pulled into euphoric trades and left carrying life-altering losses.

One story that hit us hard was a retiree Bapaks Bapaks who went all-in on a “can’t-lose” digital bank at the peak — with pension money he had earned over decades —only to watch it evaporate when the narrative collapsed.

You may have seen similar stories shared online lately; behind every chart is a real human trying to do the right thing for their family.

We’ve written before about how 2025 has felt—volatile, confusing, humbling.

As we approach October 2025, the mood reminds us uncomfortably of late 2021: the air was filled with optimism, the narratives are everywhere, and critical thinking is outdated.

Back then it was “digitalization” born in the COVID era — everything would go online, so anything with “digital bank” in the label “had” to be worth any price.

Research notes flowed, valuations floated, and serious people on Sudirman Street put out serious numbers.

Then gravity returned.

Receipts from 2021: what we were told—and what happened

• ARTO (Bank Jago) — A widely-circulated note in Oct-2021 initiated with BUY and a TP of Rp20,000, anchored on customer lifetime value and the GoTo ecosystem as growth rails; the TP explicitly implied ~29.7× 2022F PBV. The same report leaned on pandemic-accelerated online adoption and e-commerce flywheels (Tokopedia / Shopee) to justify runway.

  It even compared EV/users and argued ARTO’s valuation was “reasonable” given GoTo-enabled growth.

  

• AGRO (Bank Raya Indonesia) — RHB’s 2-Dec-2021 Initiating Coverage: BUY, TP Rp4,000 framed a “captive market + right platform” thesis, highlighting a hybrid on/offline model, the reach of BBRI’s nationwide network & BRILink agents, and a transformation that would clean up NPLs and drive CASA and NIM higher. It quantified the upside using a blend of GGM and value-per-customer (global digital bank comps).

  The same report projected CASA ratio rising toward ~78.6% by 2025 and NIM in the 7–8% range, consistent with the digital thesis.

  

• BBYB (Bank Neo Commerce) — Sucor Sekuritas’ Sept 17, 2021 “Research Notes” carried a BUY stance; the file we have is a truncated scan, but the saved title itself references a TP of Rp4,340 (document title alone captures the optimistic mood).

  

Prices? You know the rest.

ARTO ran to ~19,000 then closed 2022 around 3,000 —> -84%

BBYB surged to ~2,600, finished ~600 —> -77%

AGRO touched ~2,800, ended ~400 —> -86%

The narrative was airtight—until it wasn’t.

2025 rhymes with 2021 — different cast, same plot

Today’s trendy topic isn’t “digitalization.” It’s index inclusion.

Indonesian conglomerates are pushing hard to qualify for global benchmarks like MSCI and FTSE.

The street consensus:

“Prices can’t fall !! These konglos need to maintain prices for the indices.”

That story feels safe, institutional, almost mechanical.

But what’s safer than a narrative everyone believes — right at the top?

Sir John Templeton warned us:

The four most dangerous words in investing are: “This time it’s different.”

Those words glow brightest at the Pucuk.

Our north star (and why we’re writing this)

We believe one rule above all:

Long-term stock prices are pulled by long-term earnings power.

Short-term prices are pushed by short-term expectations.

Don’t believe us? FuNDaMenTal iS DeAd ? Just look at these charts:

10 year Price vs Earnings chart of ITMG, a major Indonesian coal mining company:

10 year Price vs Earnings chart of BBCA, virtually everyone uses this bank in Indonesia

10 year Price vs Earnings chart of OCBC NISP: A bank with origins from Singapore

10 year Price vs Earnings chart of HMSP: The myth the legend DJI SAM SOE !

10Y Price vs Earnings chart of UNVR: Probably the largest consumer goods company in Indo

When expectations sprint ahead of what a business can earn, sooner or later, prices mean-revert to the earnings reality.

When a company compounds earnings faster than the crowd expects, sooner or later, prices eventually catch up — and often overshoot the other way.

That’s why we’re not against “irrational” cycles.

If you’re a true pro who spotted the wave early and managed risk well—seriously, well done. It can change your life for the better.

Our concern is for late-arriving retail investors who enter when expectations are already sky-high, believing “it cannot go down !” often with savings they cannot easily replace.

That’s where real lives get hurt—and where the stock market earns an unfairly bad reputation in Indonesia.

The market is not a casino by design. It can be a path to financial freedom—if you let time, discipline, and real earnings do the heavy lifting: diversify across quality, pay attention to margin of safety, and be humble about what you don’t know.

Closing Remarks

We’re sharing this because we’ve seen the cost up close on our own close friends and families.

Btw this is why we built Recompound at the first place:

If this post helps even one person pause, ask a harder question, or size a position more safely, then it’s worth it.

Invest safe.

TL;DR: We get paid when you make money—20% performance fee above a high‑watermark—so we work hard to avoid big drawdowns. That’s why our picks can look “boring”: sturdy balance sheets, steady cash flow, sensible dividends, and saner volatility.

In contrast, many paid “group saham” communities run on fixed subscription fees (for example IDR 13 juta or even more per year).

Whether members profit or not, the fee keeps coming—so the incentive is to sell excitement, not to manage risk.

Different incentives → different behavior.

But our returns aren’t that “boring”

Playing it safe doesn’t mean boring results. We’ve published our performance transparently since Aug 2022 and we’re proud of it versus common alternatives.

We also update our portfolio performance live, daily—you can even “stalk” it every day if you’re kurang kerjaan 😉.

It might not buy a Ferrari or McLaren in 1–2 years—but it does compound, and compounding is the point.

Our model in plain words

• Registration: one‑time IDR 2 juta (stays active as long as you remain a member).

• Performance fee: 20% of profits above your prior peak (the high‑watermark).

• If your account goes from 100 → 80, we earn zero until it climbs back above 100. No new high, no fee.

Why this matters: big losses are business‑ending for us. A −30% needs +42.9% just to break even; −50% needs +100%.

We can’t live on hype—we only live on new highs.

Why we often pass on the “hot stories”

You might hear exciting rumors: “Stock A will be acquired by B from China!” or “Stock C will do a massive rights issue and inject assets from D!”

These are workouts/special situations—they can win big if everything lines up. But many things can go wrong (approvals, funding, terms, timing), and the wins are hard to repeat quarter after quarter for most people.

Because our income depends on your new highs, we:

• Prioritize capital protection over screenshots.

• Size carefully and demand evidence (filings > rumors).

• Prefer repeatable quality to lottery tickets.

Different incentives, different outcomes

• Subscription groups: recurring membership fees regardless of results; if you don’t renew, you’re out. Revenue keeps coming even during drawdowns.

• Recompound: tiny one‑time fee; we only earn when you reach new highs. If we drawdown, we eat nothing until we recover. So we choose the dull, durable path on purpose.

Why we don’t publish “alpha” in public

Our revenue depends on your new highs. It would be irrational for us to post our best ideas publicly for free—doing so would dilute any edge our paying clients have and make it harder to reach the next watermark. In contrast, some subscription models can benefit from public hype to attract renewals—separate from member P&L.

For context, here’s a public post from an investor describing their experience: https://stockbit.com/post/20826313 .

We won’t name any individuals or brands, but the author alleges (not necessarily true though ☺️), among other things:

• Sparse interaction from the group’s lead inside the private group.

• A confidence‑boosting message after a sharp drop, followed by an admission later that part of the position had already been sold earlier.

• “VIP” information showing up on public media (e.g., public podcasts) while members received it later or not at all.

This mismatch of incentives is exactly what our model avoids. Because we only earn above a high‑watermark, saying one thing and doing another—or giving away client “alpha” on public channels—would directly hurt our ability to get paid. So we don’t do it.

The LTCM lesson: great until it wasn’t

If you want a famous example of returns that looked amazing for a few years — until they didn’t, look up Long‑Term Capital Management (LTCM).

For a few years in the 1990s, their model delivered strong, smooth gains.

Then a sudden market shock in 1998 (Russia default / liquidity crunch) caused massive losses.

Leverage magnified the hit; the fund had to be rescued and was effectively wiped out.

The lesson is simple and timeless:

• Short periods of smooth returns can hide fragility.

• Leverage and crowded trades work—until they all need the exit at once.

• Survival beats optimization. If you don’t survive, compounding stops.

At Recompound, our goal isn’t to “look brilliant” for 3–5 years and then blow up. We want to still be here in 25+ years. That’s why we:

• keep position sizes sane and avoid one‑trade heroics,

• favor balance‑sheet strength and fundamentals,

• demand evidence over rumors, and

• design for drawdown control because our high‑watermark means no recovery = no revenue.

(Background reading: Wikipedia’s overview of LTCM)

How to judge us (and anyone else)

• Incentive alignment: Do they earn only when you win?

• Repeatability: Is the process repeatable consistently for its members to follow and grow their portfolio sustainably over the long run ?

• Risk rules: Position sizing and potential risks stated before the trade.

• After‑fee clarity: Net results, not headline claims.

Bottom line: Compounding loves boredom. Our job is to protect the downside so the upside can take care of itself.

Disclaimer: For education only; not investment advice or a recommendation to buy/sell any security. Past performance is not a guarantee of future results.

Hi 👋 welcome to Recompound Blog - The Investment Mindshift. We help you better your mindset on investment and economics one article at a time. More: Our Values | Advisory | Get to know us | Picks

Disclaimer: This post is for educational purposes and is not investment advice. Figures cited (e.g., P/E ratios) are point-in-time snapshots that change frequently. Past performance does not guarantee future results. Index data and third-party sources are believed reliable but not guaranteed.

Ask any random strangers about BBCA and most likely you’ll hear:

“It’s the best bank in Indonesia, it is safe and it is always growing. Just buy that damn thing!”

My uncle is like that — he religiously buys BBCA every month, no matter the price. Like attending the church every Sunday. He buys BBCA every month.

To him and to many people, this makes a tonne of sense. Analysts on Sudirman Street (a.k.a the Indonesian Wall Street) loved it too.

Back in Dec 2023, BRI Danareksa restarted coverage on BBCA with a BUY and a target price of Rp12,100, using a valuation anchored on the bank’s returns and a low “required return” (their term for the return investors demand).

In Sep 2024 (~1 year later), UOB Kay Hian also had BUY with TP Rp12,000, based on a simple Gordon model that assumed ROE ~21.5%, growth 8%, cost of equity ~10.7%—and at that moment their screen even showed consensus at 100% “Buy.”

I am sure that at this point, you might be expecting us to roast BBCA as a company. Well we posted an article about being idiots last week. But I don’t think we are that crazy in trying to convince you that BBCA is a bad company. As a matter of fact, BBCA is a superbly great company.

• It has a market leading CASA ratio of around 82-83%

• It is a money making machine that produced north of Rp 50 Trillion in net profits last year

• Strong and reputable management. I mean what do you expect from Djarum Group. They are as solid as it could get.

So BBCA must have been a great investment… right?

Well, not recently.

If you bought BBCA on 1 Sept 2023 and held until 25 Aug 2025 (~2 years), including dividends, your total return is about negative 2.9%.

Your money basically stood still and got nibbled by inflation.

Comparing returns between BBCA and ASII for the past year

Meanwhile, the “doomed” Astra International (ASII)—which the news said would be eaten alive by Chinese EV makers—returned +34% from Feb 2024 to now (dividends included).

If you bought BBCA in Feb 2024 instead? Negative 3.9% (also already included dividends).

How can the crowd favourite go nowhere, while the doomed child surges? Let’s break it down in plain language.

Why start the comparison with ASII in Feb 2024? Because that’s when J.P. Morgan published its ASII downgrade 2nd time in 6 months. We anchor the start date to this moment to reflect peak negativity—right when sentiment and expectations were most pessimistic.

Quoting the folks in the research report below: We downgrade Astra to UW for the second time in six months. Our downgrade this time is primarily attributed to BYD’s faster than expected entry into the Indonesian market, and we believe the market share loss for Astra could be faster and more severe than earlier expected as BYD delivers start in Mar24 (vs. initially 2H24). Based on our visit to BYD’s first mall exhibition, consumer interest was palpably high and the price range of cars is in-line with our expectations. It is also now confirmed that Astra is not distributing BYD and thus, we see higher downside risk for its auto distribution & manifacturing margins in the next two years. We now forecast Astra’s FY24-25E NPAT to decline -10/-6% y/y (vs. consensus flat y/y for both years).

You could clearly see that the author is deeply pessimistic about ASII’s business performance from the released research report. Because of his mall visit and people’s reactions towards the new line of cars. It was said: Astra’s FY24-25E NPAT to decline -10/-6% y/y. What does it mean even? So I chatgpt-ed it.

So from the mall visit and seeing people liking the car, folks at JPMorgan forecasted that the company’s net profit will decrease by 10% in year 2024. And it will be reduced further by 6% in 2025 compared to previous year, 2024.

But returns from investing in ASII is showing a different result. Including dividends, it has returned +34% from Feb 2024 to Aug 2025 at the moment this article was written.

ASII vs BBCA: Dividends adjusted, Feb 2024 until Now (Duration: ~1.5 years)

Why is this the case?

Expectations > Events (good news can make stocks fall)

The market doesn’t react to the news. It reacts to whether the news is better or worse than what everyone already expected.

Imagine going to a recently opened restaurant that has your favourite Masterchef celebrity cooking its main dish. You come in, super ready to have a bomb of a meal. Now it turns out that the meal is really great, fancy and instagram worthy. But it is not the best meal because maybe the portion is a little bit too small and it is a little bit too salty overall for you.

Despite the great experience, you might still be slightly disappointed. 9/10 instead of 10/10.

Now on the contrary, if you heard that Bakmi GM (noodle chain in Jakarta) has been reducing its portion since it got acquired by Djarum (the company that owns BBCA)! You go there expecting to have a shit experience. But when you sit down and order its chicken noodles and it just tastes like home. You are pleasantly surprised. A meal that you expect to be so-so, is “surprisingly not that bad”. A 7/10 instead of a 5/10.

Stocks are like that:

• If expectations are high (everyone is bullish, headlines are glowing, target prices are stretched), even good results can feel “not good enough,” and the price can stall or fall.

  • That’s BBCA recently: amazing company, but priced for perfection. When the “price tag” cooled a bit, the stock went sideways even though the business stayed strong. (Those BUY calls and rosy inputs show how much good news was already baked in.)

• If expectations are low (people are pessimistic, the story sounds broken), you don’t need miracles—just “less bad than feared”—and the price can rise.

  • That’s ASII: the crowd expected disaster and a fatal knock out from Chinese competition. When results turned out not that bad, the stock re-rated upward.

In investing, the gap between what’s priced in and what actually happens is where returns live.

Lets hammer the point home

A great company, as it turns out, is not always a great stock to buy at the moment. It can be too expensive.

Think of stocks like buying houses.

• Company quality is the house itself—structure, location, service, finishing.

• Stock price is the price tag stuck on the house.

BBCA is the luxury house — Crème de la crème — top location, perfect finishing. Flawless.

But if you buy it at a top-shelf price, you don’t get a bargain just because it’s nice. If the market later decides that price tag was a bit too rich, even a well-kept house can fall in value or move sideways.

This is what often trips people up.

We blur “great company” with “great investment at today’s price.”

So what went “wrong” for BBCA holders ? (in simple terms)

TLDR:

BBCA has a “A” business with a “A+” price:

1) Expectations were already sky-high.

When almost everyone already agrees a stock is fantastic—remember that 100% buy consensus snapshot—there’s very little surprise left to push the price meaningfully higher. Good news = “as expected.” Any wobble (slower growth, currency swings, higher rates) can disappoint.

2) The “price tag math” moved against you.

Return over time ≈ business progress (profits grow) + cash paid out (dividends) ± what people are willing to pay for each rupiah of profit (the “multiple”).

If profits rise but investors later decide, “we won’t pay quite that much for BBCA’s profits anymore,” the multiple shrinks and cancels out a lot of that progress. Both Danareksa and UOB show BBCA trading at premium P/B/P/E versus peers—great business, rich price.

3) Rates & “required return” went up.

When safer yields rise, investors demand a better deal to hold stocks. Danareksa explicitly based fair value on a required return (“cost of equity”); as the market repriced that higher, valuations drifted down, especially for already-expensive “quality” names.

4) Low dividend won’t bail you out.

A ~3% yield is nice, but not enough to offset a stagnant or slipping price. (UOB’s table shows sub-3% yields across the forecast years.

Why did ASII, the “doomed” stock, outperform?

TLDR:

ASII has a “B” business with a “C-” price, Expectations were the mirror image:

1. Bad news was already in the price. Many investors assumed Chinese brands would steamroll ASII’s entire business. When everyone prices in disaster, the bar to beat expectations is low: reality only needs to be “less bad than feared.”

2. Starting price matters. From depressed valuations, you don’t need perfect news to rise—okay news is enough.

3. Astra isn’t just cars. It owns financing, Astra Honda Motor with 70% market share, heavy equipment (Komatsu), coal contractor (Pama Persada Nusantara), coal mining, gold mining, nickel mining, automotive parts, used vehicle marketplace (OLX Mobbi), IT services, agribusiness, property, infrastructure, etc. That “conglomerate cushion” helps earnings even while its auto 4W division fight harder battles.

Put simply: BBCA started from perfection pricing and slipped ever so slightly to very good.

ASII started from doom pricing and crawled up to not that bad. The second path often makes more money (for us investors).

Below you can see how ASII’s actual net profit cleared J.P. Morgan’s Feb-24 downgrade bar—by about Rp3.6T (+11.8%) in 2024 and Rp1.2T (+8.4%) in 1H25. That “better than feared” gap is what fueled the rerating.

Margin of Safety: buy when expectations are already low

Buying when expectations are low gives you a Margin of Safety—room for things to go a little wrong without destroying your investment returns. Another analogy is like paying a discount price for an OK house; you found out that even if the kitchen needs work, you didn’t overpay overall.

Low expectations ≠ buying junk. You still want decent businesses with real cash flows and sensible balance sheets. The key is the combination: reasonable quality at a reasonable (or cheap) price when sentiment is down.

So, what to do? Buy ASII? Sell BBCA?

As mentioned in the disclaimer, article is not investment advice, but we can offer a simple checklist.

Use this before adding to a position:

1. What am I paying compared to its intrinsic value ?

   • Know your stock’s intrinsic value, and buy only if there’s a significant discount (relative to its value)

     • Shameless plug: read our handbook to know how we value a stock here —> https://www.recompound.id/handbook/how-we-invest

   • Premium + high expectations = fragile. Discount + low expectations = forgiving.

2. What’s the crowd’s mood?

   • Are headlines uniformly positive / negative on that particular stock ?

   • Are most brokers on one side (all BUY or all SELL)?

   • If “everyone loves it,” upside surprises are scarce. If “everyone hates it,” the bar is low.

3. How does price react to news?

   • Good results but the stock falls → expectations were too high.

   • Bad headlines but the stock holds/rises → bad news likely priced in.

4. What’s my “required return”?

   • With rates higher, demand a better entry price. Don’t pay “any price” for quality.

   • A 3% dividend won’t save an overpay.

Closing Remarks

We would like to emphasize that nothing is “wrong” with BBCA the business.

What hurt BBCA hodlers was the price they paid 1 - 2 years ago and the expectations embedded in that price.

The market re-priced that perfection a bit lower; the share price stalled.

At the same time, ASII was priced for disaster; when reality came in a little better than feared, the stock bounced hard.

Price matters. Expectations matter. Margin of Safety matters.

Or, channeling Howard Marks: don’t just buy good things—buy them well.

Disclaimer: This post is for educational purposes and is not investment advice. Figures cited (e.g., P/E ratios) are point-in-time snapshots that change frequently. Past performance does not guarantee future results. Index data and third-party sources are believed reliable but not guaranteed.

If you’ve watched our index IHSG lately, you’ve noticed something odd: a handful of stocks—often tied to conglomerate groups—have gone nearly vertical. Names like BREN, AMMN, DSSA, DCII have, at times, traded at triple-digit P/E ratios (some well north of 500x on trailing figures).

These moves don’t just make headlines; in a cap-weighted index like IHSG, they tilt the whole compass.

That’s why the IHSG can surge even while most stocks look like.. they are not going anywhere.

It isn’t a moral judgment though it is really just math. When a few very large, very fast-rising companies carry outsized market capitalization, they can distort how the IHSG looks, especially to newer investors who check only the headline index level.

Put simply, these stocks now drive IHSG:

“Is this only an Indonesia thing?”

No. The U.S. has been living a version of this, too.

At various points this year, the top 10 stocks in the S&P 500 made up ~40% of the entire index’s market cap—an all-time high. Concentration isn’t inherently evil, but it does mean the index can look better (or worse) than the “typical” stock underneath.

And if the whole spectacle feels familiar, it should: we saw a strikingly similar pattern during the dot-com bubble, which peaked in March 2000 before a brutal unwind.

What this means for Recompound (and for you)

Quick note: if you are new here you might want to find out what on earth is Recompound?

Over the past 10 months, Recompound has underperformed IHSG—largely because we haven’t chased the handful of names with extreme multiples. Over three years, our track record still outperforms the index. We know some newer clients (joined ≤1 year) are uneasy: “Why is my money lagging the index?”

Short answer: because the index has been temporarily dominated by a few stocks we don’t believe are priced for their earnings power. Chasing them might have juiced short-term performance—but at the expense of your risk. Our job is to compound capital for the long run, not to keep up with manias.

A short story about feeling wrong when you’re trying to be right

No investor captured this dilemma better than Jean-Marie Eveillard, the Paris-born fund manager who led what’s now the First Eagle Global Fund (formerly). In the late 1990s, as dot-com stocks screamed higher, Eveillard refused to play along.

Clients hated it.

“I’d rather lose half of our clients than half of our clients’ money.” — Jean-Marie Eveillard

They took him up on it. By multiple accounts, investors pulled a huge chunk of assets from his funds before the bubble burst—reporting ranges vary from about half to roughly two-thirds leaving. It was professionally miserable.

He once joked that value investing requires the courage to look wrong in the short term.

Then the bubble popped.

The scorecard: 3 years before vs after the peak

Using First Eagle’s own fact sheet for the Class A (SGENX) share class:

• 3 years before the peak

  • 1997: +8.5% (MSCI World +15.8%)

  • 1998: –0.3% (MSCI World +24.3%)

  • 1999: +19.6% (MSCI World +24.9%)

    (Painful relative years. Clients were restless & churned)

• 3 years after the peak

  • 2000: +9.7% (MSCI World –13.2%)

  • 2001: +10.2% (MSCI World –16.8%)

  • 2002: +10.2% (MSCI World –19.9%)

    (Held its ground while the benchmark fell hard.)

The discipline that looked foolish on the way up looked wise on the way down. In the early 2000s,

Eveillard was recognized with Morningstar’s International Stock Fund Manager of the Year (2001) and its inaugural Fund Manager Lifetime Achievement Award (2003).

Meanwhile, many funds that rode the dot-com wave imploded or faded into footnotes.

As just one emblematic case, the Munder NetNet Fund rocketed +176% in 1999, then fell –51% in 2000 and –46% in 2001; years later it was a fraction of its prior size.

Contemporary reports chronicled tech-focused funds shutting down en masse.

The other side of the lesson: even legends feel FOMO

Even the best can stumble. Stanley Druckenmiller—George Soros’s famed lieutenant at the Quantum Fund and the strategist behind the 1992 pound-sterling trade (the man who broke Bank of England) — knew the bubble was frothy.

He stayed disciplined…until he didn’t.

In his own words, near the top in March 2000 he “bought $6 billion of tech stocks” and, in six weeks, “lost $3 billion in that one play.”

He soon left Soros Fund Management as the firm restructured after steep tech losses.

Two takeaways:

1. Experience doesn’t immunize you against FOMO.

2. Process beats impulse. Druckenmiller himself has said he already knew better—he just didn’t act better in that moment.¹⁷

Back to IHSG, today

• Multiple IHSG heavyweights have sported triple-digit trailing P/Es at points this year (examples below).

• IHSG is free-float, cap-weighted with a 9% cap per name—helpful, but not a cure-all for concentration.

• The U.S. is simultaneously grappling with extreme concentration at the top of the S&P 500.

• The dot-com era shows how quickly leadership can reverse when valuation and cash-flow reality reassert themselves.

Examples of extreme multiples

• BREN – recent TTM P/E readings in the 500x.

• AMMN – at 60x .

• DSSA – at 150x.

• DCII – at 700x.

What we’re doing (and not doing)

1. We won’t buy narratives at 500x earnings. Price still matters.

2. We’ll own businesses, not tickers. Cash generation, balance-sheet strength, and durability drive long-term compounding.

3. We’ll accept tracking error when the index is a rocket ship. Eveillard’s experience—and, ironically, Druckenmiller’s—remind us that discipline is easiest to abandon when it’s most needed.

If you joined us ≤1 year ago, you may feel behind. That’s understandable. Our commitment is the same: protect downside, insist on margin of safety, and compound. Over three years, that approach has beaten IHSG for us; over one year, it hasn’t—because we refused to sprint after a handful of story stocks.

We know which side of that trade we’d rather be on when the music slows.

Final thoughts

The hardest part of investing is staying sane when the benchmark makes you feel foolish. Eveillard’s clients left him in droves; Druckenmiller let a moment of FOMO override a lifetime of discipline. The market is a voting machine in the short run and a weighing machine in the long run. Our promise is to keep weighing.

If you’d like to find out more about working with us, you can head over here.

Hi 👋 welcome to Recompound Blog - The Investment Mindshift. We help you better your mindset on investment and economics one article at a time. More: Our Values | Advisory | Get to know us | Picks

A little foreword from Toby. This article at a glance, might seem completely unrelated to economics or investments in the traditional financial market sense. But in truth, your child (or future child if you wish to have one) will most likely be your biggest investment. Education, travels for experience, sports, music and most importantly, your time spent for a quality interaction to impart your wisdom and values. So doing it right, or as best as you could, matters.

While Shania is not an expert nor a professional in child development, this post is meant to be interpreted as a form of sharing on what literature she’s been reading pertinent to economics of child development and translating it to more relatable and easier to understand terms for every day people like you and me. There will be a bit of math, but it is meant to illustrate a point better with mostly intuitive explanations.

Side note, if you find this post valuable and you’d like to step forward to contribute to the blog as a guest poster, email me. I would be happy to learn from you!

Introduction

I am inspired to write this post for 2 reasons. First, I am doing research related to this field and so I have to read related materials. Second, I am entering the age where soon I will be getting married and have children, and so these matters become important.

So what am I writing about? My questions are simple:

1. Is someone’s “smartness” genetic or buildable?

2. If my kids are born “not so smart”, should I do something about it or just accept it? Or maybe find his/her other hidden talent?

3. When I have kids in the future, should I keep working / hire a nanny / send my kids to childcare?

4. Do I need to send my kids to lots of different tuition (extra-curricular stuff) like my parents did for me? Or should I just let them play, have fun, and have a great childhood?

5. Should I focus a lot on academic achievement when they are young?

6. What is the best way to raise a kid — should I work extremely hard so that I can earn a lot of money to send them to expensive school (or maybe even go overseas) and hire expensive teachers? Or should I focus on spending a lot of time with my kids, playing with them, reading with them, going to museums and parks, etc etc?

At the end of the day, I was also reflecting on my childhood and what my parents did to me. I guess I am pretty lucky as I would think that I had a pretty good childhood.

I naturally don’t mind studying and even grow to enjoy them. I do well academically in school. My hobbies were what parents deem to be good hobbies. I like reading and playing music. My parents send me to lots of tuition — English, Mandarin, Abacus, Piano, Violin, Ballet — and I don’t hate them.

But my brother’s case was different. My brother did not like studying nor reading. He was also forced to go to tuition, albeit a much smaller number — he only had to attend English, Mandarin, school supplementary session (or what we call bimbel, where students do their school homework and prepares for school exams). He came in second last in school, would find every possible reasons to skip tuition, and was more interested in playing Play Station.

So if you are a parent with 2 kids — a Shania and a Shanio (a fake name for my real brother) — you may wonder, what should you do? Should you force Shanio to go to all these tuition? If he has been coming second last in school, should you give up all hope in him?

Here’s some of the lessons we can learn from the field of Economics.

The Economics of Child Development

What? Economics and child development? How are they related?

Getting into this may be the topic of an article in itself, but here’s the short answer.

Yes, the field of Economics is not just about GDP or interest rate or the stock market. Economics is about studying how people make decisions and trying to infer causation. So how Economics relate to child development is like this: how do parents make decisions on how much time and money to spend on their kids? And how much do parental time and money investments matter in the development of the child, with any possibility of the importance of the time in which these investments are made?

Most of this article will be summarising the findings of several prominent papers in the Economics of Child Development — Cunha and Heckman (2007); Cunha and Heckman (2008); Cunha, Heckman and Schennah (2010); Todd and Wolpin (2007) — with the main reference being the Cunha and Heckman (2007) paper.

A Simple Model

We can think about a child’s cognitive ability (or intelligence) as an output. If you put in different types and different amount of input, you will get a certain amount of output.

An analogy is like cooking. If you put in some chicken, garlic, rice, egg, and soy sauce into the pan, you get chicken fried rice. If you change the chicken to prawn, you get prawn fried rice.

Now there is also an element of the chef. If you get the chef of Bakmi GM to cook, you’ll get a pretty solid plate of fried rice. But if you ask Toby to cook, you’ll need to pray hard not to gulp down 10 tables of Norit after.

So you can think about a child’s cognitive ability as an output that requires input (both the type, quality and quantity matters).

To put this into mathematical language:

In the equation above,

represents the cognitive ability of a child at time t,

represents the parents’ characteristics (such as IQ, education, etc),

represents the investments that parents make for their child (which can include multiple things such as how many books they buy, how often they read with their child, how often they bring their child to the park, how much money they spend on school, etc), and…

represents the cognitive ability production function.

So you can think of the left hand side as the output, and the terms in the right hand side as the input. As for the function f at time t, is the chef that will convert the input into the output. In this case if you are a parent, you are that chef that puts in work, time and money into your child so that they will be of a certain state at time t+1, a.k.a in the future.

The equation above is trying to map how a child’s cognitive ability in the next period is a function of the parents’ characteristics, the child’s cognitive ability in the previous period, as well as the investments the parents make in the previous period. All of this also depends on the technology (or the chef) responsible for converting the inputs into the output.

We can then play around a little bit. If you think that the child’s ability at age 10 is affected by his ability at age 9; and the ability at age 9 is affected by his ability at age 8; and we continue; we’ll soon notice that at the end of the day, his ability at any period depends on his ability at age 1. Just doing some notational change, I can re-write equation (1) above to:

Now, the exact form of equation above is unknown, that is, I don’t exactly know how the input is converted into output and how much input is needed to produce a unit of output.

In simpler terms intuitively, I don’t know if I want to produce a child as smart as Albert Einstein, what exactly I need to give him as an input — books? toys? tuition? play station? — and I don’t know how much of each input I need to supply — 2 books a month? 1 car toy a year? 3 math tuition sessions a week?

But I can have several hypothesis of how my input to my child today translates to the output of my child tomorrow. So I’d like to introduce 2 features into equation (2), which are the notion of

(i) substitutability/complementarity, and

(ii) self-productivity.

Don’t worry if this does not make sense now.

Substitutability vs Complementarity: Should I put in effort when the child is small or when he/she is older?

Substitutability or complementarity seeks to understand whether the investments I make when the child is very young (say 4-6 years old) is a substitute or a complement for the investments when the child is older (say 7-10 years old). For instance, if I want my child to be good at math (the output is high math ability) and I am considering sending him to Kumon (investments), should I send him to Kumon when he is young or when he is older, or both?

If investments exhibit substitutability pattern, it means that if I fail to supply high amount of investments when the child is young, I can still make up for this when the child is older. Therefore it does not matter when I send the child to Kumon. If you are also considering financial planning, maybe it makes sense for me to save all of my salary when the child is still young, then use this money to invest and generate returns. In future, I’ll have more money to send my kids to more extra-curricular or supplementary tuition.

On the other hand, if investments exhibit complementarity pattern, it means that if I have invested in my child when he is young, this investments would generate even more return when I invest again when he is older. Formally, this relates to the fact that skills produced at one stage raise the productivity of investment at subsequent stages. That means if I have sent my child to Kumon when he is young, I should continue putting effort to harness his math skills when he is older (I should continue sending him to Kumon or any other math lessons). On the flipside, if I did not send my child to Kumon when he is young and he has shown to be bad at Math since young, then it is not the most economically efficient to try making up for his poor Math skills when he is older.

Now, what does that data show?

Empirical studies have shown that investments seem to be complementary. A study by Currie and Thomas (1995) shows that a pre-school program that aims to improve cognitive ability to minority and disadvantaged groups experienced initial improvement, but without follow-up intervention, these individuals return to disadvantaged environments.

The takeaway for us? Paying proper attention and investing in your children when they are still young is critical, and this should be continued even as they grow older.

Is there a period where it is most important to invest properly in my kids?

Now comes the question of returns to investments. It’s almost like investing in any other monetary instruments or in the stock market. Suppose you have the option of buying a government bond and earn a return of 5% annually, or you can invest in Indonesian equity by using Recompound’s service and earn a return of 15% annually — anyone would know to choose Recompound right?

Now comes the element of time. Suppose you have 2 options of stocks to buy — a pharmaceutical company (say Kimia Farma (KAEF)) or an instant noodles producing company (say Indonesia’s national pride Indofood (INDF)). If you invest in February 2020, one year later, you would make a returns of 870% from KAEF and about 0% returns from INDF. But if you invest in May 2024, by June 2025, you would have earned 37% from INDF and lost 29% from KAEF.

The above example highlights the point of sensitive period. Sensitive period of a child’s development refers to the period in which an investment generates the highest return compared to any other period. For instance, if the sensitive period of a child’s math ability is at age 4, this means that if you spend IDR200,000/month on Kumon tuition at age 4, your child’s math ability would be developed the most compared to attending the tuition at age 10.

What does the data show?

The study by Cunha and Heckman (2008) finds that there is a different sensitive period for the development of children’s cognitive and non-cognitive (measures of temperament, social development, behavior problems and self-confidence) skills. The authors find that the sensitive period for parental investments in the development of cognitive skills is at younger age — that is, the transition from ages 6-7 to ages 8-9. Meanwhile, the sensitive period for the development of non-cognitive skills is at a slightly older age — the transition from age 8-9 to 10-11.

The takeaway for us? If you want to develop the cognitive ability of your child, start as early as age 6-7 At the same time, do not neglect the non-cognitive development of your child and pay greatest attention to non-cognitive development at around age 8-9.

My child is not doing well in primary school. Is he a hopeless case?

Now we’re going into the topics of self-productivity.

Self productivity means that skills acquired in one period persist into future periods. For instance, if your child exhibit plays the piano very well at age 4, you’d expect them to continue being very good at music even at age 5, 6, 7 and onwards. This musical ability will not just disappear one year later. This also can mean that skills are self-reinforcing and cross fertilising. Self-reinforcing skills mean that one’s stock of skills at one period also contributes to the development of skills in the next period. Intuitively this makes sense, a child that plays a grade 4 piano at age 5 can play a grade 5 piano at age 6 because they have the pre-requisites of playing a grade 5 piano.

Cross-fertilising skills capture the idea that skills in one area may help the development of skills in another area. For instance, playing piano really well might help a child develop mathematical skills.

What does the data show?

Again, the study by Cunha and Heckman (2008) shows that there is strong self-reinforcement in children’s cognitive and non-cognitive skills. This is quite intuitive because the better a child gets at a certain skill at an earlier age, the better that child would be at that skill at a later age if that skill is continuously honed.

More interestingly, when we consider cross-fertilisation, it is found that non-cognitive skill contributes to the development of cognitive skills, but not the opposite direction.

The interesting bit is because “soft” skills, ability to empathise, socialise, etc that are not formally taught in schools actually mattered to the development of cognitive skills that require more of an analytical mind such as math and engineering.

So how important is it for me to invest in my child?

Combining the features of

(i) complementarity/substitutability and

(ii) self-productivity,

we can then introduce the third feature, which is (iii) the multiplier effect of parental investments

The multiplier effect maps the relationship of early investment not only in directly developing the skills of the child on period 1 and then through self-productivity, the skills in period 2, period 3, and so on. It also captures the effect through increasing the returns of investment in period 2.

To simplify this example, suppose there are only 2 periods: period 1 is when the child is young (say age 4-10) and period 2 is when the child is an adolescent (age 11-17). Suppose that by age 18, the child turns into an adult and his skills is denoted by the term

Then we can construct the equation below that denotes the function, input (your investments to your child), and output (the child’s skills) at a period of time.

So how do we comprehend the multiplier effect?

The multiplier effect is illustrated in the flowchart above.

• I_1 acts as an input and affects theta_2 directly (second box),

• which then serves as an input for the production of theta_3 (last box on the most right).

• This shows how I_1 affects theta_3 through the channel of self productivity.

At the same time,

• I_1 also acts as an input that affects theta_2 directly.

• But remember that there is a dynamic complementarity component in the production of ability.

• Higher theta_2 makes the returns of I_2 higher, and so increases theta_3.

Well this, my friends, are perhaps why we see child prodigies. It is not through one-off investments that are made by the parents at the early or the later stage of a child’s life. But it is through consistent investments that is being made throughout the lifetime of the child that seems to enable the multiplier effect to take place.

The takeaway of all this?

1. Non disputable: Investment in your children matters (best if done consistently throughout their childhood).

2. Pay attention not only on their cognitive skills, but also on their non-cognitive skills.

3. Data suggests that it is good to invest in a child’s cognitive skills as early as possible, and this investment should be continued as they grow.

4. Data suggests that investing in the development of a child’s non-cognitive skills, particularly when they enter the age of 8-9. This not only benefits their non-cognitive development, but will also help them build their cognitive skills.

Raising a child is not easy, but from what I’ve heard, it’s a meaningful journey.

And just like investing with Recompound (I myself am a client), it is full of ups and downs and it requires a lot of patience.

But hopefully, if done right, the returns will be well worth the investment. Good luck ❤️

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This article discusses a basic logical error that I have seen to be increasingly more common. We make this logical error when discussing with peers and make our beliefs (that are not proven to be true) appear as facts. In my view, identifying beliefs that are separated from knowledge is a useful skill in various aspects of life and it is a sign that an individual has become more thoughtful overall.

And in case you missed it, we launched a new product last week. Thank you for the questions and support, we will continue to iterate from your inputs and suggestions.

The advent of telecommunication devices and internet has allowed us to consume copious amount of information from various sources. Information is now very widespread that it is poising questions regarding the necessity of a university education alone. More commonly, WhatsApp, Facebook, Instagram, YouTube and the likes are given nicknames university.

For example, how do you know that Creatine is good for muscle development? Answer: YouTube University.

Or how do you know that UK is experiencing a political turmoil between their two factions? Answer: Random political observer that I saw on a family WhatsApp group.

You get the point.

As a result of this voluminous information, time for us to distinguish between knowledge and belief becomes more and more scarce. Verifying truthfulness and logically soundness of knowledge is no longer a trivial task.

What stems from this difficulty though?

Opinion: I think this stems from beliefs that disguises as facts that is supported by a common logical fallacy in philosophy, called “Slippery Slope Fallacy”.

To break it down:

• What: Belief disguises as facts.

• How: Slippery slope fallacy.

Before we define what is slippery slope. Let’s give a fun example first so that you don’t doze off.

“If we allow gay marriage, people will be marrying their pets!”

Why? ”If we allow gay marriage” —> “people might start adopting pets to commemorate the occasion” —> “increase in pet adoption rates among newlywed couples” —> “pet grooming and fashion industries will boom” —> “To keep up with the trend, pet groomers might begin offering bespoke wedding attire for pets” —> “enterprising individuals will start to market high-end, designer pet weddings, complete with expensive venues and elaborate ceremonies” —> “people will be marrying their pets as a way of life.”

Disclaimer: this is an example of a slippery slope fallacy in action and not to be construed as my opinion regarding gay marriages.

From the exaggerated example above, I think you could have an intuitive grasp of a slippery slope being a logical error that an action leads to a chain of events without providing any evidence for such a chain.

So a cause X can have any result Y. Provided that the intermediary link between X and Y are beliefs instead of a fact that is supported by proper evidence.

Family reunion often is a good occasion to collect some of these logical fallacies

Especially when we have so many conversation starters at the dinner table. For example:

Trump Tariffs necessitates economic (trade) agreement between U.S. and China. If there is no agreement. Then Indonesia’s currency is doomed.

Why?

• U.S. and China no deal so U.S. will slap tariffs on China

• China reduces exports to the U.S.

• China slows down as the factory shuts down

• Indonesia cannot export coal to China

• No demand for Rupiah because Indonesia’s exports will go down

• Indonesia currency is doomed

This statement is mentioned by a fairly intelligent and respectable member of the family. Of course, because that member is aware of the economic activities of Indonesia, they are well versed with global affairs and they know about the importance of manufacturing as an economic driver for China.

If you are another family member who’s grappling with terms like export imports, trade deficits and balance of payments. The statement and causal relations would make a lot of sense. You yourself will also be worried:

• Should I be buying USD then?

• Should I pull out my Rupiah denominated investment in this uncertain times?

• What’s a safe investment vehicle for me at this juncture?

• Oh no oh no…. Is social learning ideal?

There are other slippery slopes like:

• the launch of sovereign wealth fund in Indonesia eventually would cause the country to go bankrupt.

• tariffs in the US will eventually cause foreign investments in Indonesia to pull out entirely

• and many more

But let’s turn our attention to the first slippery slope fallacy regarding Indonesia’s currency being doomed if there’s no trade deal between US and China.

What determines the strength of currency of an emerging economy, like Indonesia? And why is the statement above a classic example of a slippery slope fallacy?

Read more

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I am still working on the Part III of Indo Stocks. If you missed the first part where I talked about currency depreciation, here’s the link. If you missed the second part where I talked about price manipulation, here’s another link. In any case, I think this article is quite apt in the wake of what has been happening from time and time again: market crashes.

Hint: there is a gossip section at the end for paid subscribers.

And disclaimer: This article is not an investment advice. It is only for educational purposes only and should not be taken out of context. I certainly wish that it is helpful for you, our kind reader. Have a blessed week!

On March 19 2025, the Indonesian market experienced a trading halt. This was caused by the sudden volumnious amount of selling that happened, driving prices down.

Amid fear sentiments that are caused by frauds, layoffs and launching of the new sovereign wealth funds purportedly controlled by dubious individuals, now IHSG trading halt might feel like a nail in the coffin. It also triggered an outburst of fear sentiments amongst netizens at large. Numerous social platforms that allow such discourse suggests:

• the country is going bankrupt next year

• there will be massive amounts of unemployment

• and many more bouts of negativity

Your closed ones (friends and/or family) might also be reiterating these points to you. I know, for one, that my Dad is the alarmist in the family. Repeating whatever the news said such as wars, bunch of guys ransacking stores in the U.S., and now Indonesia gelap with plenty of negativity and bleak outlook of the future.

This article is not going to be about commenting the fear, negativity or concerns. This write up is more of a little playbook that I personally use when I am having unpleasant emotions because of market crashes like the one that happened recently. It is a 4-step process that is free, very simple and the aim is to make me (almost) instantly feel better about the current situation.

Also, this playbook is more for long-term investors. If you are a day or swing trader, this playbook may not be entirely suitable for you.

Step 1: Deal with the unpleasant emotion that arises within myself

If you are not feeling unpleasant at all when looking at the market crash and believe that you are calm and have the capacity to think clearly, you can go to step 2.

Before opening your trading app or (hopefully Recompound client dashboard), let’s identify and label the unpleasant emotion. The first and most important step to deal with unpleasant emotions is to first know what you are feeling. You might be feeling unpleasant, but if you don’t know what exactly you are feeling and what is causing it, you may end up venting it to the people around you - you partner, kids, parents, friends may become unknowing and poor victims.

Usually, when receiving negativity from multiple sources (media, friends, family, etc), that negativity will “get” to you as emotions tend to be contagious. That exact feeling is usually labeled as overwhelmed.

To be exact,

Overwhelmed: Feeling like you have been taken over by strong feeling

If you consume multiple bad forecasts and negative coverage, you might also feel apprehensive.

To be exact,

Apprehensive: unease and worry about something (bad) that might happen

These two distinct feelings are high in energy and are unpleasant. Here’s how I handle it to instantly feel better. The tool:

• is free

• has (almost) instant results

• is accessible anytime (when you are awake)

• is science-backed (Dr. Andrew Huberman, a neuroscientist from Stanford, champions this tool)

It is called the physiological sigh. It is a pattern of breathing that involves double inhale and an extended exhale. Yes to repeat:

• Step 1: Double inhale

• Step 2: Extended exhale

I usually do this 2 times and I will become calmer instantly. It reduces the energy of the emotion as it activates the parasympathetic nervous system and it usually gives me the much needed focus to think clearly. Here’s Dr. Andrew Huberman explaining it in 3 minutes.

Step 2: Remind myself about the idea of being invested

Now that I am less apprehensive or less overwhelmed (after doing step 1), we can now remind ourselves about why we are invested. This step for me is even simpler than step 1. All I need to do is to run over 3 facts about my investments:

1. I have an active income (or savings) to rely on as my source of livelihood

2. I don’t rely on my current investments as my source of livelihood

3. I am invested for the long term (multiple years down the road). Although markets crash today, that does not mean that there will be no growth, ever

When I get reminded that investing means buying a business and I think like a business owner, I know that market crash does not have to be the end of the world. But I might still feel concerned:

To be exact,

Concerned: wondering if something is okay

Yes, I don’t have the full picture as of yet if the market crash is okay for my investments. But at least I am now calmer and I am ready to move on to the next step.

Step 3: Evaluate objectively if my businesses will be impacted by the crash

So I will look at my investment portfolio, and look at the investment thesis that I have at the start. For example, I am invested in a said upstream Crude Palm Oil (CPO) company because I believe that:

• there is a decrease in number of productive supply of palm trees in Indonesia, which takes long (about 4 - 5 years) to replant and another 4 years to reach a productive tree age — i.e. decrease in supply

• there is an increased in demand CPO because of biodiesel subsidies in Indonesia

• therefore, CPO prices would be higher for longer and companies with productive trees will benefit from a sustained increase in earnings

Then I will look at the cause of the crash (there will be a gossip section at the end also for paid subscribers). For example, it is because of foreigners selling when interest rates in the U.S. is high. But usually you can scroll through the news and you would see some media coverage about the crash that explains why the crash happened.

Now I will take a look and assess if the crash is causing my thesis to be invalidated.

Is the foreign selloff going to reduce the demand for CPO? If the answer is not clear, we can have a different format:

Is the statement above true or false? Most likely false.

Now we go over all of the businesses that we have invested. And ask the question is the foreign selloffs (purported cause of the crash) invalidating my investment thesis or not?

Shameless plug, if you are a Recompound client you could go to client dashboard, enter your username (found on your personalised WhatsApp group) and go over to the investment thesis section. Then you can go over your investment thesis. Not yet a client? Shame (kidding kidding).

Once we have gone over my investments one by one and the answer is all false, then I will feel calm.

To be exact

Calm: feeling free of stress, agitation and worry

But if it turns out that one of the answers is true (although this is quite rare), then I will always sell that position in the investment.

Step 4: Do I have extra funds to invest for the long term?

After doing step 3 and realising that all of the investment thesis are not invalidated, I will ask myself if I have an extra fund to invest for the long term.

Why long term funds? Because there might be another crash tomorrow, or next week or next month. If I use funds that I need to use next week (for example), another market crash might cause my returns to be bad 😞

If I don’t have an extra fund to be invested for the long term, I guess I will do nothing and I will just go back to work (expanding the active income pie). If I do have an extra fund, I might want to allocate some to stocks that are discounted even more deeply as market crashes like this does not happen every day.

And when you make the investments with a cold fund, especially at a super discounted price with very clear investment thesis, you will feel confident

To be exact

Confident: feeling sure of yourself

Start state: overwhelmed. Reads 4 step playbook. End state: confident. #magic.

Closing Remarks for Free Subscriber

I hope that this 4-step process showcases how you could make use of this playbook to feel from being super overwhelmed and apprehensive about the market, to being calmer or even more confident.

Let me reiterate, unpleasant feelings are usually contagious. You might unknowingly receive it from sources of information that you passively consume which affects your emotional state overall. Instead of escaping it or judging the emotions as bad, it is often more productive to acknowledge it and take concrete measures to deal with it. Often there are cheap and valuable tools at our disposal to regulate our emotions well, especially when life happens.

Managing that unpleasant emotion into a more pleasant is key to keep our day to day more steady.

If you are a paid subscriber, there is still a gossip section as to why IHSG did a trading halt (or at least from what I heard).

So what might cause the trading halt recently?

Read more

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Disclaimer: While we mention investing in various economies in this article, the words are not meant to be construed as investment advice nor guidance. This is article serves as a story for educational purposes and for us to reflect. Hope it is useful in any way :)

To answer the subtitle, the Indonesian stock market already is crashing and burning as of Feb 2025. We don’t know how burned or crushed the market is going to be though. But if you look at KOMPAS100, you can see that we are already quite close to COVID levels.

Now I’ll open the article saying this. There is a lot of skepticism in the Indonesian stock market. A lot of the times I get into calls via calendly (you should book a call with me if you want to get to know us more btw, it’s free and I don’t sell stuff) they worry and are afraid of investing in the Indonesian equity.

There is a laundry list of reasons that create the overall hesitancy and worry. But after a while, I start noticing patterns of their fears in investing, especially in Indo stocks.

Now let’s have an honest conversation about the negative sentiments and describe them to the best of our knowledge through a story.

One day, there is an intelligent individual who works at a bank. His name is Budi. His work captures analysing the Forex market on a daily basis and he is super skeptical on the Indonesian economy overall. He thinks Indonesia is dark (gelap). Therefore, it follows that he thinks that he should not invest in IDX as they are all non-investible because…

Budi thinks that IDR is always depreciating against the USD

That chart looks nasty because we can clearly see an uptrend of USD against IDR. At the turn of the century, 1 USD is at around Rp 7.000,-. Fast forward 25 years later, 1 USD is already around Rp 16.400,-.

If Budi holds, USD 10.000 in 2000, he would have more than doubled his wealth Rupiah terms.

Initial value: Rp 70.000.000,-

End value Rp 164.400.000,-

Cool, let’s see how that fares against an annual inflation rate of 3.5%. It is relatively simple to calculate:

Plugging the initial value and the annual 3.5% inflation over 25 years, Budi gets Rp 165.427.149,-.

Great, he thinks to himself, holding the dollar over 25 years saved him from a 3.5% annual inflation. What if he puts the Rp 70.000.000,- in and track the index in 2000? Well that money would be around Rp 700.000.000,- in 2025. Yes, despite the crashing and burning of the market nowadays.

But still, because of our weakening currency, Budi does not want to hold Indonesian equity (companies) at all.

Therefore, he believes these companies are not investible because they are earning money that gets weaker and weaker.

Well Budi, how about Brazilian companies?

Now let’s take a look at similar a country (in size and population) that also has a weak currency. Brazil.

From this chart alone, Budi estimates that 1 USD has strengthened against Brazilian Real by 3.5x.

Budi says that no Indonesian companies are investible because of the weakening currency (2.5x in the span of 25 years), it follows also that no Brazilian companies are investible because of the weakening currency (even worse at 3.5x in the span of 25 years).

Is this judgement correct? Well, Morgan Stanley disagrees with Budi. MSCI’s weight on Brazilian economy is 4.49% (Indo is around 2%). So Morgan Stanley actually thinks that Brazil is more investible than Indonesia, despite their weaker currency over the long term.

But of course, Budi might be smarter than Morgan Stanley. Being a banker himself who analyzes Forex for a living, he still thinks that no Brazilian equity is investible because of its weakening currency.

That’s okay.

How about the Indian Stock Market?

Then Budi might be interested in investing in the Indian stock market. I mean take a look at the gains of NIFTY index below. It was from about INR 1500 in 2000 to INR 23,600 in 25 years. In the last 5 years, it went up from around INR 11000 to INR 23600, which has a CAGR of around 15%. That’s a super growth!

So clearly based on the growth of the equity in India, would Budi think that the Indian stock market is investible? Yes!

But not so fast. Budi earlier said that Indonesia’s companies are not investible because of the weak currency. Let’s take a look at India’s currency against USD.

Well it turns out, the INR also weakens overtime against the USD (around 2x since 2000). So by Budi’s currency standards, no Indian companies are also investible.

Some Remarks

Let’s examine the fear or hesitancy one more time.

“I do not want to invest in Indonesian companies because Indonesian currency gets weaker and weaker against the dollar overtime”

With this logic, we will not want to invest in:

• Brazilian companies

• Indian companies

• Vietnamese companies

• UK companies

• Japanese companies

• and many more companies from other countries that have a weakening currency against the US over the long haul (long haul to be defined starting from the year 2000).

because their currency got weaker against the dollar over the long haul. The only companies that we can invest right now is the U.S. While we are definitely not against investing in the U.S., Warren Buffett seems to be a little bit cautious, considering their cash pile at Berkshire continues to grow.

Considering all the points, charts and story above, now it is our turn to answer:

Is our fear of currency depreciation real or imaginary?

After reading this article, if you conclude that your fear turns out to be imaginary, and wonder what to do next, the lowest hanging fruit is to give us a call. We’d like to talk to you and see if there is a way you could seize an opportunity when others are super fearful 😄

Subsequent Parts

We are not done yet. In the subsequent parts, I will cover people don’t invest because they think:

• Indo stock prices are always manipulated by Bandar

• Indo government is not trust worthy

We’ll examine the fear head on to see if they are real or imaginary.

Disclaimer: This post is heavily referenced from Taleb’s book Fooled By Randomness Part I Chapter 3. It is not to be construed as financial advice and only written for educational purposes.

This might sound mind numbing or ridiculously counter intuitive. But the following is the tendency that we have observed time and time again multiple times. People seem to almost always get thrown off by short term (day to day or even minute to minute) price fluctuations when they invest.

But perhaps have we taken a moment to ask ourselves:

Out of the pluses and minuses of price that we see on a regular (daily basis), what is considered to be noise*?

What is considered to be information* or signal or meaning?

* Noise means it is something you should ignore; information is something you should pay attention to.

This writing is my attempt to shed light on how we could have a clearer picture.

Let’s start from the basics

Suppose we choose to invest in a hypothetical asset that has an expected return of 15% per annum.

I know IDX composite (in Feb 2025) is hammered immensely by a lot of people, but if you look at the Compounded Annual Growth Rate (CAGR) since inception, it is around 12%. Hence, 15% is a reasonable assumption and expectation of returns per annum of a fictional investible asset.

Now suppose the volatility of the asset is 10%. 15% is a respectable annual return, so it follows that the 10% volatility is the price we pay.

Translation: it means the asset price from time to time can go up and down in such a way that deviation from the actual return you get is 10% (it could be 5% on the lower side of the spectrum or 25% on the higher side of the spectrum).

Extra translation: remember your expected return (15%) is not equal to your actual returns. To wit, below is an illustration that might help.

Introducing a little bit of middle school math

The information above is great in theory. But even with the translation and illustration, what does it mean?

Actual returns is not equal to expected returns? Yes.

So even if I expect to have 15% yearly, I can have -80% returns right over multiple years right?

Yes, although given the information above, very very unlikely. You can win at a casino one time, but are you likely to win at a casino over and over and over again over multiple years?

To explain this question in a clear manner, recall Normal Distribution we used to learn in SMP. We can call it Gaussian Distribution as well if you want to impress some lady/lad during Valentine’s 🙃

I won’t go into the formal definition and notation (calculating the pdf and cdf unnecessarily). But let’s just have an intuitive picture on this. The simple intuition is as such:

Imagine, you investing in this hypothetical asset with 15% expected returns and 10% standard deviation that follows a gaussian distribution. This means that at any given year, you can expect that there is a 68% chance your investment returns will be between 5% and 25%.

To wit, below is an illustration that if you throw a dart at random, your dart will land on the blue zone with a chance of 68%. You will miss the blue zone and land on the red zone (for better or for worse) with a probability of 32%.

And throwing a dart is akin to seeing the returns for a given year.

Now this 68% probability of returns between 5% and 25% in a given year. Easy. But we often care about making money. That means, if we throw a dart, how likely it is that we get a positive returns (>0%) in a year given that expected returns is 15% with a 10% standard deviation?

That number is 93%.

Yes, with the same assumption (expected returns of 15% with 10% deviation), we can expect that if we throw a dart, it will land on the blue zone 93% of the time! In other words, there is a 93% probability that your investment will have returns greater than 0% in a given year.

Think about it, this signals that it is not a bad investment overall. You stay invested for 10 years, you only get 1 bad year. The remaining years are wonderful.

Now let’s have the exact same asset but we shorten the time span

It’s still the same asset. The expected returns is still the same at 15% per annum and the deviation is also still the same at 10%.

But, what is the probability of the asset having returns (more than 0%) over one minute?

We can compute this and the answer is 50.17%. To wit, you can look at the expanded illustration below that illustrates the probability of success if we shrink the timeframe from 1 year to 1 minute for the exact same asset.

What the illustration above shows us is that if we throw a dart at random every minute, the dart only needs to land at the blue zone 50.17% of the time so that the asset can have an expected return of 15% with 10% deviation.

In the Indonesian stock exchange, the market is open for 5 hours and 20 minutes. This means that for the given asset, you will have:

• 165 minutes that are winning

• 155 minutes that are losing

statistically speaking.

Now here’s the problem

The 1 minutes of losing is not equal to 1 minute of winning because people are generally loss averse.

1 minute of losing almost always carries more weight than 1 minute of winning. It is more emotionally draining to see a losing trade than it is more emotionally uplifting to see a winning trade.

That is why we might have a tendency to view that the asset that we are seeing is a bad asset because maybe in a day, you have the 155 minutes of losing upfront. And then we proceed to get angry or time the market or {insert other impulsive things we do} only to realise that our decision was made based on noise.

All you have to do is to look at the returns on a less frequent basis. And you will find a more useful signal whether your asset is performing well or not.

Taking it personally

There is one thing that I find super encouraging from this piece though.

We can always view ourselves as an asset. You can imagine that we would grow in terms of skill, intellect and other things. Over the long term, if our expected annual growth is 15%, if we shrink it minute by minute, we only need to “win” slightly over half of the time (50.17% to be precise).

That my friends, is why they always say:

Make small wins every day and you will see the benefits to your growth over the long run.

And just a reminder when you face a bad day:

It’s potentially just noise and randomness, putting you in the red zone once in a while.

It’s just math. It’s all there is folks.