The Importance Of Deep Derivative Thinking To Build Greater Wealth

Most people are leaving a ton of money on the table because they aren't taking time out for deep thought, or derivative thinking.

The people with a Financial Samurai mindset think in derivatives to maximize their financial situation, while those without just see the outcome for what it is and nothing more. They come up with an investment thesis as their guiding light to stay invested and keep on investing for the long term.

Let me explain with two examples. Remember, this is a personal finance site that emphasizes financial optimization. You can achieve financial optimization and XYZ. They are not mutually exclusive.

A great investor connects the dots. Once the dots are connecting through derivative thinking, action is then taken.

The Ousting Of A CEO – Derivative Thinking At Work

If you've been following the Uber story like I have, you'll realize that everybody from the mass media to social media is talking about how one blog post by Susan Fowler, a female engineer took down their CEO along with several other high-level executives. See below at the number of Uber executive departures this year:

The number of Uber executives out after Susan Fowler's post
Travis is no longer CEO as of 6/20/2017

While the story of how one woman can make a difference is an empowering one for those unfairly treated in the workplace, I couldn't help but wonder why nobody discussed the implications for individuals after such a move.

What happens to those who speak out? How can one benefit from speaking out without risking their own reputation? How can one who speaks out not only help other people but also extract maximum financial value from a bad situation? 

Publicly damning your managers who mistreated you can be seen as a noble cause for those who are too fearful to speak up. But the key derivative of writing a tell-all blog post is the TERROR you bring to your managers and HR if they don't immediately address your concerns and take care of you via a generous severance package when you've had enough.

Employees Have More Power Than Ever Before

Employees have the most power to ruin a company's reputation now than in any time in history. A reputation takes a lifetime to build, but a moment to destroy. Reputational destruction is the reason why negotiating a severance is possible!

The last person you want to mess with is someone with a powerful online platform who is not dependent on anybody to make ends meet. This person will bury you 10 feet in the ground if you cross her! Yet, Susan still needs a job and was successfully able to completely obliterate management. She just did so after she found a job at Stripe.

Don't you think Uber would have gladly settled with Susan for a cool million or ten million if she kept her allegations off a public stage? Of course they would have. Susan could have settled, and still told all her friends what a terrible experience she had.

Freedom of speech is an undeniable right. Uber probably spent more on hiring a couple law firms to conduct the extensive investigation alone. Further, Uber could have easily lost $7B off its $70B private market valuation since Susan's post went out.

Fight For Your Severance Package Like Senior Employees Do

Plenty of executives leave with multi-million dollar severance packages for helping drive their companies into the ground. Why can't you and I walk away with tens of thousands or even hundreds of thousands in severance as well? Yet nobody in the media put this derivative conclusion together.

If you have a job, think about what this rising trend of tell-all blog posts can do for your career, your work environment, and your bottom line. If you are being mistreated at work, know that you're building credits for a potentially massive settlement if your employer continues to mess with you. Document everything, just like how HR documents any perceived transgressions to protect themselves. Plant your flag online already.

True power is NEVER having to put up with dirtbags at work because you don't have to work any more. This is one reason why money is so important. And to clarify, I'm not suggesting employees nefariously shakedown good employers for money. I'm saying that there is always a silver lining in a terrible situation if you plan carefully and negotiate.

Transportation Derivative

Uber is a game changer for transportation because it has drastically lowered the cost of getting anywhere by car. For example, it used to cost $25 – $28 to go from the west side of San Francisco to downtown. Now it costs anywhere from $3 – $10 using Uber pool.

Since Uber has raised roughly $12 billion in funding to subsidize riders and drivers, the obvious course of action is to take an Uber instead of a taxi to save money, drive for Uber to make side income (not worth it anymore), and start a website to earn driver referral income. Normal folks like you and me couldn't invest in Uber during the early rounds because most rounds were invite only. Therefore, we've always got to be thinking of doing the next best thing.

But if you spent time thinking beyond the obvious actions, there is one HUGE derivative implication that can make regular folks a lot more money in every major city. Think about how cheaper transportation costs can change the demand dynamics in real estate.

If a new subway station gets announced in an area, demand for housing and pricing there will rise. Therefore, the derivative thought is to assume that Uber's ubiquity should bode well for cheaper neighborhoods that are farther away from work centers. Suddenly, the cost and time involved living farther away from work no longer matters as much.

Since Uber really began to take off circa 2013, we've indeed seen a faster appreciation of property prices in lower cost neighborhoods. What has driven the San Francisco single family home median high to a record $1.5M is not the established neighborhoods closer to downtown where prices are softening (D7), but the least expensive neighborhoods out west nearer the ocean (D2). Take a look at the chart below that gives some indication of the level of demand in various neighborhoods.

The hottest neighborhood is now the West Side (D2) as cheaper transportation helps boost values

Related: How To Get Rich: Practice Predicting The Future

Take The Time To Think DEEPLY

For every action, there is an unintended consequence. The classic example is raising the minimum wage so high that it drastically reduces demand for minimum wage workers. The intention is to help more people make a livable wage, but the end result might devastate a demographic. Perhaps investing in McDonald's is a good idea since they cater to a lower income demographic and are going to automate everything. Oops, McDonald's stock is already at a record high.

The second classic example is implementing rent control, which artificially limits the supply of homes and pushes rents higher for everyone else as a result. The only people who benefit are landlords and the dwindling percentage of people with rent controlled apartments. Perhaps investing in heartland cities without rent control is the logical conclusion.

You might be thinking that it's too hard to think in derivatives and then take action. Yes, it's harder than trying to be a minimalist that's for sure. But all you've got to do is allocate some TIME to yourself to think deeply about the events that are happening in the world to find money making opportunities. So few of us do because we're stuck in a routine. Break out and flourish instead!

Invest In Private Growth Companies

Here's some derivative investment thinking to consider. Invest in an open-ended venture capital fund where you can see what companies are in their portfolio. Then you can decide to invest and invest how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum.

41 thoughts on “The Importance Of Deep Derivative Thinking To Build Greater Wealth”

  1. Deep thinking has always been the best way for me to make sound decisions. When you are able to focus and make a deep analysis this makes the brain work harder. Just like a muscle the more you exercise deep thinking, the more you benefit from it. Deep thinking allows us to look at an issue from a number of different angles thus allowing us to think about the consequences of the issue at hand. In school they teach us to remember this , and follow a certain amount of steps to get something done. Deep thinking is a valuable asset to have in today’s society and definitely gives you the edge.

  2. I mean we won’t know whether she signed a couple pg employment contract or a 10 pg contract. What were the clauses related to NDA, NCA, stocks, arbitration, yearly time? It’s hard to see what will happen to Uber fund raising 1 billion a year to offer rides at a lost. When will Uber investors expect Uber to turn a net profit year? 5,10,15 years later? The closest example I think remember is Tesla raising a new 1 billion yearly from pension fund, fortune 500s, governments.

    What is concern is the management turnover. Everyone there is promised millions, I have no doubt. Uber’s management isn’t throwing away millions in stock and leaving the company for nothing. There has got to be something seriously wrong there.

    However my valedictorian classmates who were promised low millions from Tesla in there employee contracts have all left the company and forfeited ‘their millions’. The contract is something along a minimum 5 yrs before vesting is allowed, Elon keeps spending every penny the company has in it’s bank accounts on new exterior truck, van, small car design, building new vehicle and battery plants in India, China it’s unlikely they’ll see that stock jump significantly in 5-10 years as the company’s accounting department’s goal seems to be annual $0 profits. So you are working for many years at below mkt salary for this 10000+ startup with a promise that after half a decade to a decade you’ll be a multi millionaire. Would any of you accept this promise?

    1. I think so. 75% chance. They’ve cleaned house and can start hiring “public company” executives now and give them 1+ year in their seats before going public. And if not Uber, then Airbnb.

  3. Duncan's Dividends

    I really like what Ms. Conviviality is saying and I’m looking into cars tech that is running the automated car systems. They are becoming more prevalent and I am seeing them being tested more and more in the Phoenix area. It will be interesting to see how the tech shakes out with the regulations being created within each state and even city, but this is definitely one of the waves of the future.

  4. Charleston.C

    Funny you used real estate as an example of unintended consequences due to Uber. That’s just the tip of the iceberg. We are closer to having self driving cars than ever before. The dreaded commute will soon be replaced with slightly less dreaded commute where the “drivers” can spend the duration of the commute watching tv, eating breakfast, or whatever he or she choose to do.

    Someone can reasonably live 3 hours away and commute for work, if he or she is just sleeping during the commute. And for that reason I predict a second wave of suburban development, once auto-cars become widely available!

  5. Ms. Conviviality

    I believe that smart cars will go mainstream in the near future so I’ve been using my “punt fund*” to buy stocks in companies that are working on the processors to run smart cars. The companies’ stocks are up 47% so far this year.

    *One of Sam’s articles suggested an allowance of 5% of net worth to throw towards risky investments because it’s a great way to not feel like you’re missing out on great opportunities for the sake of being conservative. Worst case scenario is losing the 5% but it shouldn’t be detrimental to one’s overall finances.

  6. Save Splurge Deny Debt - Cameron

    Interesting read Sam!

    I am in an old Fortune 500 company that literally has no ‘real’ HR department. There are a couple of people designated to handle complaints and an anonymous caller number but that is about it. I wonder how my company would handle these types of allegations as I yet have to see or hear of anything happening.

    Also when it comes to deeper thinking I always seem to think of weird deeper ideas. For example, when I worked in the advisor world we had many clients asking about weed stocks and investing in them. I always half jokingly suggested investing in Scotts Miracle Gro Co. or another fertilizer company that would benefit from weed production.


  7. Yes indeed, Sam! I Hear you. One has to learn to how to read the tea leaves, then have
    steel nuts to execute when the opportunity strikes.

  8. I noticed there is no high level Human Resources position shown in the graphic. Does it go by a different name? Maybe that’s Uber’s problem, lol.

  9. I am really glad Susan actually told her story and did not do it for the sake of money. The moment money or settlement come into picture they will try to paint the person to have done it for money and somehow what she is saying is not true.
    I think it took a lot guts for her to do it and I don’t think she imagined the impact it would have but good for her.

    1. I think you miss a key point. Susan jumped out of the skillet and back into the fire at Stripe where it’s still a startup bro tech culture. She will always be susceptible to harassment as a women in Silicon Valley Tech culture.

      There are many incidences where harassment situations get reported in the news and THEN there is a settlement and the news reports on the settlement.

      1. Man, are we still in 2017?! I’ve only heard of Uber’s lawsuit with Google (my husband absolutely ranted his head off about it.) and I thought that was the worst of it. I doubt Uber has a billion dollar valuation then my dog can learn how to talk.

  10. Hi Sam – I have read your blog for a long time, but I have never commented much. I’ve got to say that I don’t understand your position regarding Susan Fowler. What are you trying to convey?

    Are you saying that she should not have spoken up? Or that she should have done it before securing another job? Or that she should have traded her voice against the sexual harassment for money? Or that companies should simply pay people off instead of doing the right thing?

    What she and many women face in the workplace every day is far bigger than simply a financial concern.

    1. Of course she should’ve spoke up. Too many people sit in silence and do nothing to fight back. I’ve always encouraged everyone to take action and fight for themselves. And even in a bad situation, there is a silver lining.

      At the same time, too many people are unwilling to speak up because they are afraid of the financial repercussions. I hope more people get their finances together so they will no longer be afraid. And I hope companies are aware that if they mess with employees, there will be massive blowback.

      I want to do something, which is why I published this post to raise awareness. I have also publish this post in the past:

      Now I challenge you to speak up. There’s no point saying things are bad but doing nothing about it. For example, there is supposedly a pedophile ring in Hollywood, but how come nobody has identified the actual perpetrators?

      If you’re willing to share your story and write a guest post about some difficult situations that you experienced that other people might also experience, and offer some solutions I’d love to have it. Thank you so much!

  11. I’m glad Susan decided to speak out instead of angling for a large settlement and then only telling her story to her close friends and family. I think her speaking out publicly benefited more people in the long term. Private settlements don’t necessarily force a company to overhaul themselves, battling public perception and outcry does.

  12. Bitcoin Collector

    Bitcoin: Whoever owns some today will be very rich in 1 year, and even more in 3 years…that’s my forecast, already up 500% and holding (HODL). Silver bullion is probably a good one too although price hasn’t done much in years, it could take off by next year when we see hyperinflation. I’m surprised you haven’t spent more time studying crypto currencies especially to avoid tax extortion schemes. You sound like what I consider a traditional mainstream conservative investor, which is totally OK, just sharing my perspective. Most people don’t have much risk appetite.

        1. For people who don’t trust Bitcoin a derivative play is the technology behind crypto currencies as well as the chips used to power the technology. There are numerous companies involved. Some doing quite well.

  13. Great post, Sam. Love this kind of thought provoking blog post.

    Interested in hearing more about why it’s not worth driving to Uber anymore. It seemed that even recently you were talking about the benefits?

  14. MyFiIntheSky

    I don’t think Susan would have received anywhere near a $1-10 million settlement, because there is no real guarantee that her story wouldn’t surface anyway. I think it’s pretty hard to leverage a bad workplace environment for anything more than very low six figures, even in extreme examples. For every Uber story, there are 100 more stories that are just as serious, but that the whims of viral media ignored for some reason.

    As outsiders (and investors), I do think it’s very important to dig deep and analyze potential outcomes from various big events or trends, but we have to be careful not to over-estimate our predictive ability… There are just too many competing forces at work. It’s why index investing is so popular :)

    1. If only I could tell you some of the severance package amounts I’ve consulted with several people on. You’d be shocked at the amount, especially since there wasn’t this type of legal battle going on.

      Your belief and comment is MUSIC to management and HR’s ears whenever there is some type of issue. They count on employees not believing in their rights to roll over them.

      This post is to challenge readers to share some derivative thinking to help grow wealth. What are some derivative thoughts you have in mind? Thanks!

      1. I’m speaking as a management-side employment attorney at a large law firm, so I’ve seen my share of very large executive severance packages. The large severances happen all the time (as I’m sure you’ve seen), but in my experience, there’s usually a business reason for them (i.e., a non-compete), or even just the company’s desire to take care of someone who has been a good employee. I’m guessing this is the type of severance package you mention seeing in your comment since you say there wasn’t a “legal battle going on.”

        Susan probably wasn’t going to get the “prized employee” severance package, so her payout would have been in exchange for a release of her potential legal claims. A non-disclosure or “keep quiet” provision, like I think your post was discussing, does happen sometimes, especially with sexual harassment claims. As you would expect, settlements are generally deeply discounted because of the time, cost, and risk that an employee faces in litigation.

        For Uber, Susan’s potential individual lawsuit probably isn’t worth that much–certainly not the billions you estimate in decreased market valuation. Her story is what hurt them. Would Uber have gladly paid $10 million to save those billions? Of course. Would paying that $10 million to Susan accomplish this? Doubtful–especially if she’s telling all her friends like you mention, and especially if there was some type of systemic issue at the company that likely would have come to the surface regardless. I have no idea whether there were systemic issues at Uber–this is just me theorizing about a couple of the many reasons that they wouldn’t pay her $10 million. Maybe in hindsight they should have though, who knows…

        (I probably don’t need to mention that none of this should constitute legal advice. Please see a licensed attorney with any severance, employment, or other legal questions, etc., etc.)

        I do fully agree with your post in that I hope employees stand up for their legal rights, and that they seek legal counsel before allowing their employer or anyone else to roll over those legal rights.

        Finally, since you asked, here’s a silly (quasi?) derivative example, but one I’ve been considering lately. There’s a lot of geographic arbitrage in Los Angeles–i.e., way cheaper/nicer houses in better areas further away from the city, but then obviously the commute gets really painful. So I’ve been considering buying one of those cheaper houses and riding a motorcycle to work since lane splitting is legal in California. It would allow me to invest more, and even save on some gas money, but the obvious downside is the safety risk, which I’m not sure I’m willing to take at this point.

        1. geo arbitrage in L.A. way cheaper/nicer houses in better areas further away from the city:

          If you don’t mind my asking what area is this? My son will be transferring jobs
          and currently looking for a place there. Perhaps, I can pass him that info.


          1. MyFiIntheSky

            I was thinking specifically of the San Fernando Valley, but it really depends on where your son is going to be working. A lot of people like living in Pasadena if they work down town. I work in Century City, so my housing options are a little more limited. Let me know if your son has any specific questions–would love to help him get settled in LA.

            1. Many thanks, he said he will be in the Riverside area, I will certainly pass on the info to him.

  15. Thinking is good thing Sam. :)
    Thanks for another great post.

    It can payoff to pat attention to trends, and stories and figure out how to make $ from them. The amazingly fast way of transmitting information, (true or fake) via internet and Social media can make opportunities.

    A few months back, I made a cool 15% on a short term play by buying United at the open when it was down 4% just because of the airing of the video showing the passenger being drug off the plane. Why would people sell just because of that story?? Do people think there are that many options to fly? There aren’t. The industry is essentially a monopoly.

    While a bummer for the guy and a PR nightmare for United, the true value of the story is not billions off the companies value! Within a few days, stock rebounded and more (As it was bound to do). While there is always some calculated risk, this was not a hard decision to buy.

    Successes like this come from just paying attention and putting a little brain power to work.

  16. energytrader

    I live in India. Maybe my philosophy is wrong but to the extent possible, I would like to avoid Uber as much as I can. The way Uber has created a debt trap for all the drivers is beyond appalling. The market is already super saturated because Uber drastically changed its “incentives” structure overnight, simultaneously coupled by a surplus demand now. The only ones to benefit were the car financing companies and banks and uber itself and its super predatory. I’d look for alternate sources of investment.

  17. I’m pretty sure they would have ignored her if she asked for a million dollar. They pushed her out and treated their female workers like hookers. Obviously, the HR department didn’t know what they were doing and never addressed her complaints or fix the underlying problems.
    Why should they give her money if they have gotten away with it for so long? Hindsight is 20/20.
    I’m glad the investors cleaned house a bit. These @*$#% managers must have slept through their ethic class.

    Power to the people!

  18. Grant @ Life Prep Couple

    I had not heard of Susan Fowler. I love the way she handled herself. I don’t like the idea of keeping records of everything with hope of getting a massive settlement though. I believe that creates a victim mentality which makes everything be perceived as harassment, misconduct, etc. Do you think this will have any effect on Uber’s bottom line long term? Like you said they provide a fantastic service.

    Anytime I find myself trying to this type of deeper thinking I always find myself getting stuck rather quickly. It is very difficult to make future predictions when so many variable exist. Things always look obvious after they happen but it is quite difficult to see forward when in the moment.

  19. “True power is NEVER having to put up with dirtbags at work because you don’t have to work any more. This is one reason why money is important.”

    So so true, you don’t have control over your future if you don’t have some kind of stability. You don’t need millions in the bank to achieve this, just a cushion is enough to give you some sense of flexibility and not having to eat all kinds of shit just because you are handcuffed.

    I think deeper thinking on this level is hard because it’s very hard to chart out the outcomes when you’re in the situation (plus it’s also hard to get above the fray when you’re in it because so much of your energy is consumed by the fray itself).

    Lastly, and more specifically to the first example… how many whistleblowers do we never hear about? That get blacklisted before it hits the news? I suspect the answer is *plenty.*

    1. All it takes is one whistleblower to make a change. This year, it’s Susan Fowler. Every single private and public company in America is taking note, bolstering its HR policies, setting up diversity/discrimination training programs, and more to protect the company and help existing employees.

      The whistleblowers we don’t hear about are the ones who’ve settled. If they want to make a change, they will reappear and share their story. There are enough whistleblowers who are telling their story and THEN settling with a company and THEN seeing their story get picked up by the media.

      1. I wish more whistleblowers got this type of publicity and had true protections, they are a strong check against bad behavior. I think what Susan Fowler did was very brave but it will (and likely has) cost her tremendously both financially and emotionally. It’s not easy to do what she did.

  20. You make the following two statements in your piece and I am interested in how you think about these two competing thoughts.

    “Uber is a game changer for transportation because it has drastically lowered the cost of getting anywhere by car.”

    “Since Uber has raised roughly $12 billion in funding to subsidize riders and drivers…”

    Has Uber actually reduced the costs of transportation with an app, or are investors just subsidizing rides? If they are just subsidizing rides how long is that sustainable? I’ve been reading up on this article below and I am not sure Uber can expect the same network effects and path to profitability other tech companies can being that they are a transportation company.

    1. Yes, it has thanks to the $12B in funding used to subsidize riders and drivers. There is an endless amount of money chasing deals. They can be lose making for a very long time b/c investors keep giving them other people’s money.

      For example, it used to cost $25 – $28 to go from the west side of San Francisco to downtown. Now it costs anywhere from $3 – $10 using Uber pool.

      Fighting the Fed, who wants to make all asset owners rich, and fighting liquidity is a losing battle. People who have held cash and rented have gotten crushed.

      1. >There is an endless amount of money chasing deals.

        while this is true, that doesn’t mean Uber gets unlimited runway. people can spot when a deal goes sour. i love companies like Uber for the convenience they have brought, and a level of service that haven’t been seen in the US taxi industry. But as their global expansion is being cut off, the high end of their valuation is shrinking. In my mind they have always been a company that needed to break through technology like self driving cars to justify their 70 billion dollar valuation.

        That valuation has taken a tumble. Think internally they still value at 60 billion. Secondary market has it slipping closer to 50 billion:

        reasonable valuation is likely closer to 20-30 billion without breakthrough tech. down round is coming and if no one is willing to pony up another billion, however unlikey, the doors will close on this story.

        >Don’t you think Uber would have gladly settled with Susan for a cool million or ten million if she kept her allegations off a public stage?

        For Uber, NO. They’ve shown this through their actions in several cases that is still ongoing. Rape in India where they obtained victims medical records and no one turned in the executive, executive now fired. Anthony Levandowski case with Waymo (Google), accusation of stealing 9.7GB of data totaling ~14,000 files, self driving car initiative now halted. They’re known as a company for breaking rules, but they never reigned it in as they grew.

        Susan took on many risks by whistleblowing on this whether she thought she would get this much traction or not. Target on her back from people that love Uber (petition to bring Travis back at 1000+ employees), people hating on her for gender reasons, and people accusing her of being a liar.

        1. With private valuations, the number is always opaque. The bottom line is that its valuation took a hit after the debacle. The rape case in India was settle for a private amount btw, but now has resurfaced w/ new info.

          This post challenges readers to think in derivatives. What are your derivative thoughts that may create new wealth?

  21. Thanks for the great post Sam. This is a wonderful reminder to take a step back and contemplate carefully. It’s too easy to get bogged down in task lists and daily to-dos. But as you’ve pointed out we need to consistently make some time to think about if those to-do’s are worth doing!

  22. It’s interesting you brought up the story about Susan Fowler. I honestly haven’t followed her story, but I am impressed at the power of her blog post.

    Now that people can use their phone to video tape anything and anyone anywhere and tell their stories in social media, employers need to be extra careful about what they do. However, I think employees do run the risk of a revenge and slander lawsuit by their employer if they don’t have solid evidence to back up their claim.

    I also wonder if a future employer would be extra careful with them since the employee has a history of speaking out against their employer. I know I’d be a fit fearful if I were in Susan’s shoe. But I admire her for speaking up.

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