Noahs' Arc 2023 Q4 Newsletter

Divide and Conquer

Executive Summary

*Note: This letter may sound philosophical and non-actionable at first. I wanted to move go from abstract to direct impacts (on certain stocks and on Noahs’ Arc). 

Discipline vs. Motivation -  The relationship between discipline and motivation, especially their significance in personal growth and achievement is imperative. I believe the core of this lies in understanding how motivation fuels discipline, especially in the face of challenges.

Addressing Bad Habits: Psychological and Medical Strategies - How do people currently break bad habits? I want to look at how we (as humans) break bad habits, combining psychological approaches and recent medical advancements, like GLP-1 drugs, to what might become a solution going forward. I’m not arguing that GLP-1 drugs are the solution for everyone, but for some this may be the way to more than just lose weight. I am arguing, however, that GLP-1 drugs are an interesting place to pay attention to as an investment arena in 2024. As always, not investment advice. 

Personal Reflection: Strategic Division for Success - Reflecting on personal experiences, Noah and I made the decision to divide and conquer in our professional ventures (Ultima and Noahs’ Arc).

Conclusion: Controlling the Controllables in an Uncontrollable World - Drawing on former Umich Psychologist Greg Harden's insights, I wanted to wrap up focusing on controlling the controllables. 

Discipline vs. Motivations

I’m by no means a behavioral psychologist. So what I’m trying to convey in this letter is my best attempt at analyzing the science I’ve read.  

Discipline and motivation, though distinct, are intimately connected in driving human behavior and achievement. I believe motivation is the impetus for action; the reason we behave in a certain way, and can be intrinsic, emanating from a strong desire within, or extrinsic, derived from strong external factors. Discipline, on the other hand, is the ability to work or act in a specific way, consistently adhering to standards and guidelines that direct us towards success. It is the mechanism that keeps us moving towards an outcome when motivation fluctuates.

With this, psychological research has touched on willpower, a key component of self-discipline. Willpower is often likened to a muscle with a finite strength (our brains), which can be depleted through exertion. When we mentally over exert ourselves, this depletion leads to "mental fatigue," or burnout, impacting subsequent acts of discipline. However, this energy model of self-control is being reevaluated, with some scientists suggesting that motivation might play a more significant role than previously thought. 

It's proposed that the brain, upon sensing a potential reward (like carbohydrates), becomes motivated to exert more effort. This implies that motivation, rather than mere energy replenishment, could be crucial in sustaining willpower and discipline.

In essence, it's a lot easier to enjoy and excel in being disciplined towards a goal if you enjoy the process that you have to encounter in order to stay disciplined. Motivation threads into this. 

If your goal is to be fit and healthy, enjoying the process of eating right and exercising regularly is imperative in order to be long run successful as your motivation to continue will wear down otherwise. 

If you want to be successful (long run), I believe you have to enjoy what you do first. If you are too focused on the outcome and not on the process, I think it will be hard to maintain the willpower to keep up discipline. 

Bad Habits (How Can We Control These?) What’s the Investment Here?

I bought this book the other day, and while I am someone who really tries to NOT judge a book by its cover, I already feel like this book will disagree with a lot of what I personally believe about free will (I sincerely believe we have free will). 

What I do agree with (based on interviews I’ve watched from Professor Sapolsky) is that certain choices we make are based on desires we have (a small example: what ice cream flavor you may choose to eat). This decision is largely based on what flavor you like the most. But what flavor you like the most is largely not your decision. In a lot of cases it’s just who you are. 

So while you can choose to eat another ice cream flavor, this would be going against the flavor you instinctively want. 

Similarly, people with addictive personalities and strong addiction centers face a related, but more extreme setup. While they may make a conscious decision to avoid a desire to binge eat or avoid tending to their addictions, this goes against the strong instinct they have. For a lot of people this is hard. 

Traditionally, breaking bad habits, such as compulsive behaviors and addictions, is a multifaceted challenge that often requires a combination of psychological strategies and, in some cases, medical interventions. Psychologically, understanding the habit loop is crucial. 

This loop consists of a cue that triggers a craving, leading to a response, which in turn provides a reward. Methods to break bad habits include quitting cold turkey, although this is difficult due to the ingrained nature of habits in the brain (we are now learning these are literal ingrained chemical/hormone releases coinciding with bad behaviors). Changing the habit loop by replacing bad habits with new routines, using small steps to gradually eliminate the bad habit, tracking progress to reinforce determination, and focusing on good habits to starve the bad ones.

You may be wondering where I am going with abstract discussions about bad habits, free will and discipline?

My point is that some bad habits are a result of extreme chemical/hormonal imbalances in our brains that, in essence, crimp people's free will (it makes it much harder for them to exercise true discretion and discipline). This is not to say this behavior is good (I believe everyone should try to be the best version of themselves) -it just makes doing this more of an uphill battle. 

Now for the investment piece (of an investment fund’s newsletter): GLP-1 drugs (like Ozempic) can help change these chemical imbalances. This is a huge problem set that could be solved. 

*this is not investment advice, just my opinion. 

Why GLP-1 Drugs Are So Exciting

From a medical standpoint, recent studies have highlighted the potential of GLP-1 drugs, like Ozempic, in managing compulsive behaviors, especially those related to food. In individuals with disorders that create repetitive and compulsive behaviors, liraglutide (another GLP drug) has been found to reduce severe obsessive food cravings, binge eating, weight gain, and behavioral problems. This suggests that the GLP-1 signaling pathway may be a novel target for treating such behavioral issues.

Some studies are even showing that GLP-1 drugs may help reduce compulsive non-food or drink related habits like gambling and binge shopping.

Why? The loose theory (so far -again not an expert) is that the hormone receptors in our brains that release dopamine when we do a compulsive behavior that we are not supposed to do (like binge shopping) are loosely related to the sugar levels in one’s body. GLP-1 drugs help regulate these sugar levels. 

Drugs like Novo Nordisk’s Ozempic, and Eli Lilly’s Mounjaro present promising candidates. While these drugs are by no means perfect (previous weight loss drugs have had terrible side effects) and these drugs are not approved for uses like reducing compulsive shopping or gambling, the potential is huge. 

In essence, these medications may be able to literally help people change their decision matrices on behaviors deemed bad. These drugs could literally increase one’s sense of free will. 

What’s that worth? Guess we’ll have to find out (this also assumes that the future potential of these drugs is not already priced into their stock prices). 

Eli Lilly is up 59.71% YTD and Novo Nordisk is up 51% respectively. 

Personal Note: Noah and I are Dividing and Conquering

You may have noticed that this newsletter was written in first person instead of third. Noah and I have decided to divide and conquer in order to focus on what we each best feels like where we can best apply our best efforts to succeed. Noah Jacobs will be working full time on Ultima Insights, the AI company we Co-founded last year. Doing this reflects the essence of this newsletter: discipline. 

While we both agree this decision stems from the recognition that while discipline is crucial for maintaining consistency, for me this is an opportunity to align my underlying motivation for the work that I do. 

Starting a business (and succeeding) is hard. Really hard. I think there are countless quotes out there that if an entrepreneur knew how hard a business was before they started it, many would not do it. For myself, I don’t regret any of what we’ve built over the last 2 & ½ years. 

We’ve both learned a ton and I am excited to be running the fund. Ultima took a pivot recently, focusing on tools to help sales people better understand their leads to increase the odds of closing them. They’ve reconfigured the website to reflect this. I highly recommend you check it out. With this it's best that we focus on the things we are most apt to be disciplined at. 

Noah's aptitude for solving discrete problems aligns him with Ultima. Ultima is an AI company, first and foremost. I can’t code, so having Noah (plus our other two technical Co-Founders on the team -Adi & Mo) means the whole team can iterate, think, and code into existence what needs to be done faster. Coding is often a discrete problem set. 

In contrast, investing is usually non-discrete. You can do all the research you can imagine just for an investment to be wrong. Or you can get lucky and be right. It's an interesting phenomenon (in my opinion), but one I’m still obsessed with. It means sometimes you have to think incredibly abstractly, but have to arrive at a hypothesis that is really simple (complex ideas or strategies often don't seem to be consumed by the market as well as simple ideas). I’ve enjoyed investing since I was 12 when I bought my first stock. This hasn’t changed, and will not change when I am running the fund on my own in 2024. 

Conclusion

I’ve been drawing from a book a mentor Noah and I have gotten to know gave us (granted I have been slow to read it). The book’s author, Greg Harden, a celebrated psychologist from our alma mater (Umich), wraps this up.

Harden's insights, as presented in his new book "Stay Sane in An Insane World," align with this. Harden's approach, built from his extensive experience advising world-class athletes and leaders, centers on mastering control over one's emotions, reactions, and responses to circumstances; what do we do if we have bad behaviors or compulsive habits? 

His teachings include committing to self-improvement, becoming an expert on oneself, (to know how to control the impulses that Professor Sapolsky implies may be chemical imbalances), to know how to fuel motivation, and how to lay the groundwork for discipline. It's a perfect alignment between his book and my thoughts in this newsletter: discipline and motivation are affected by our enjoyment of the process and how we are biologically wired for certain behaviors and responses.

For all of you who have been reading this quarterly newsletter as Noah and I have written it over the last *wow checks calendar* now 3 years, I know I can speak for Noah in that we sincerely  value the feedback we’ve gotten. Thank you. 

Us deciding to work on different projects does mean this is the end of how we have historically done things, but I’m confident that this is just the first chapter of something great (both with what I am sure he and the team will make with Ultima, and what I’ll strive to build here). 

Until then, I’ll continue to keep you posted on what's going on with Noahs’ (now Noah’s) Arc once a quarter. Noah writes his own newsletter. You can check that out here. 

Best wishes to 2024. Go Blue!! Beat Bama.

Noah Cox