Good afternoon.

How often have you been online, or viewing social media, and seen speculators bragging about the killing they just made on cryptocurrency or meme stocks?

That can make it hard to remember a basic truth: You won't be hearing from, or about, the losers. While the few who made money are strutting in the spotlight, countless more who lost their shirts slink into the shadows.

As I wrote in 2014:
When talking about their trades, losers use a muzzle while winners use a megaphone. If you hear a lot more about profitable trades than unprofitable ones, you get a distorted view of how good that particular trader is, how profitable this kind of trading is overall and your own chances of learning how to be good at it.

That's true for individual securities, for sectors and strategies, for entire markets and asset classes. Survivorship bias—our cognitive blindness to the invisible multitudes of losers—warps how we see the world of investing:

The most famous example of survivorship bias comes from military history. 

Wikipedia:
During World War II, the statistician Abraham Wald took survivorship bias into his calculations when considering how to minimize bomber losses to enemy fire. [His research team] examined the damage done to aircraft that had returned from missions and recommended adding armor to the areas that showed the least damage, based on his reasoning.

This contradicted the US military's conclusions that the most-hit areas of the plane needed additional armor. Wald noted that the military only considered the aircraft that had survived their missions; any bombers that had been shot down or otherwise lost had logically also been rendered unavailable for assessment.

The bullet holes in the returning aircraft, then, represented areas where a bomber could take damage and still fly well enough to return safely to base.

Thus, Wald proposed that the Navy reinforce areas where the returning aircraft were unscathed, inferring that planes hit in those areas were lost.

I've been fascinated by survivorship bias for decades, but a few days ago I came across the most intuitive explanation of it for investors I've ever seen:

Think about it. Let it sink in. Bookmark it.

10-K Diver's illustration of survivorship bias is so vivid, it could help immunize you against the risk of trying something reckless just because somebody else makes it sound riskless. Wait, weren't there more of you? is the ideal question to ask. That metaphor of Russian roulette might even help you visualize the losses that are always swirling silently beneath the surface.

On Aug. 26, 1919, the Coca-Cola Co. sold shares to the public for the first time, raising $20 million. That Aug. 23, the Journal noted that the company was seeking to place the shares "in the hands of permanent investors."

Like many of today's initial public offerings, the deal protected the company's incumbent management from interference by the new investors by restricting the new shares' voting rights. 

An earlier attempt at a stock offering had failed in 1892, but this time Coca-Cola's timing was perfect.

The IPO price was barely above six times the company's after-tax earnings. With alcohol about to be banned nationwide under the 18th Amendment, the Prohibition Era was imminent, giving the soft-drink industry an effervescent boost.

The IPO was a hit.

On Aug. 29, the Journal reported that orders for the stock had poured in with "such volume and divided into so many small lots" that investors wouldn't know for days whether they'd received any shares.

If you think Wall Street's fees are high today, consider this:

The net proceeds to the Coca-Cola Co. of the stock offering were $15 million. On those proceeds, the primary underwriter, Trust Co. of Georgia, had earned $2.5 million when it resold the shares to the syndicate of banks that distributed the stock nationwide. Those banks, in turn, took another $2.5 million in "spread" for themselves.

Thus, fees accounted for 25% of the IPO price and 33% of the net proceeds to the company. (Nowadays, gross underwriting fees on stock offerings in the U.S. average about 5%.)

Coca-Cola's shares began trading in September 1919 on the "Curb" or "Outside" market (later, after moving indoors, known as the American Stock Exchange). There, brokers gathered outside on the curbstones just south of Wall Street in Manhattan and traded, rain or shine.

Here, from that same year, is a postcard showing the pandemonium of outdoor trading:

Messenger boys pulled buy and sell orders off telegraph and telephone lines inside nearby offices. They would either transmit the orders with hand signals and whistles from office windows to the street or run the orders outside to the curbstone brokers. Down in the street, the brokers fought, often with their fists, to fill the orders.

After hours of screaming and shoving each other to trade a few shares of Coca-Cola, these curbstone brokers probably wanted a much stronger drink than a Coke.

Here are some of the best things I found over the past week outside The Wall Street Journal:

• How individual traders got creamed buying call options on hedge-fund manager Bill Ackman's SPAC, by Institutional Investor 
• If you decide to invest actively, look for the uncomfortable first, says asset manager Mikhail Samonov
• Just what the world needs: an ETF that can buy marijuana stocks with borrowed money
• We need infrastructure spending, but history shows many big projects get built for a future that never materializes, says The Conversation
• U.S. corporations pledged $50 billion in 2020 to promote racial justice. Where, asks the Washington Post, did it go?
• A U.S. military family finds loss and hope in the heartbreak of Afghanistan, by Joy Lere (h/t @brianportnoy)
• To live a meaningful life, let go of the delusion that everything is meaningful, urges writer Mia Levitin (h/t @williamgreen72)

Here are some of the best things I found recently in The Wall Street Journal:

• With taxes expected to rise, municipal bonds are suddenly one of the hottest assets around, Heather Gillers reports
• It's hard to get even a toehold on how to measure a company's "carbon footprint," report Jean Eaglesham and Shane Shiflett
• Turning Japanese? The future of the U.S. might look like Japan, with massive government spending and an immense debt, says Peter Landers
• The 17-year-old soccer star who fell to his death trying to escape Afghanistan: a heartrending profile by Joe Parkinson, Ava Sasani and Drew Hinshaw 
• Our reviewer likes the new autobiography by the late founder of Trader Joe's, the quirky and popular supermarket chain
• Jason Gay writes about the world's fastest woman golfer, who can shoot 18 holes, one stroke under par, in 50 minutes
• Retire? Never! Suzanne Kapner meets Iris Apfel, whose design business (including 1.6 million Instagram followers) is booming at age 100

Do you ever brag about your investment successes? Why (or why not)?

To share your thoughts, just hit reply to this email. Please include your name and city, thanks!

In our Aug. 11 newsletter, I asked:

Do you think leaving your portfolio completely alone is more likely to result in better returns from benign neglect, or lower returns from inattention to impending problems?

A portfolio is like an ice cube: the more you handle it, the quicker it disappears.
—Mark Hirsch

Definitely the former, just like fine wine or diamonds! If I put my money in the S&P 500 today and leave it alone for 30 years, it’s almost a certainty that I’ll make at least 2% annually (after adjusting for inflation) based on historical 30-year rolling-period returns.
—Anand Taralika, San Ramon, Calif.

Have done this experiment this year: Returns on passive 401(k) with bimonthly contributions are significantly higher YTD than my IRA with the same contribution schedule and risk profile, but actively invested into mix of equities and funds. Both are higher than my stock-picking brokerage account.
—Daniel B. Thompson, Miami Beach, Fla.

There may be a relationship between a portfolio benefiting from being left alone and its size (number of constituents). The more constituents there are, the more it will benefit from being left alone.
—Jedrick Theron, Cape Town, South Africa

My way of "timing" the markets (impossible to do perfectly, of course) is to sometimes raise cash when stocks are frothy by stopping dividend reinvestment. At some point after or near the bottom of the inevitable crash or correction, I start it up again. By then I have some cash to buy more...
—Carolyn Wilson, Pine Island, Fla.

Be well and invest well,

Jason

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In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches. You should try to maximize return only if losses would not threaten your survival and if you have a compelling future need for the extra gains you might earn.
—Peter L. Bernstein