Luke Wiley is a hacker. He’s not the kind of hacker you’re probably thinking of – he doesn’t break into computers or steal identities, he doesn’t hack life’s little problems by putting his iPhone into an empty glass to amplify his music or freeze his bananas to make them last longer. The thing that he hacks – the thing that put him into a position to retire in his early thirties – is money. Specifically, he’s an investment and retirement planner and one of the best at the global firm he works for – which, unfortunately, has some company rules in place that prevent me from naming it. But, trust me, you’ve heard of it and Luke has risen rapidly up the ranks in a very short period of time.
Sound investment strategy, from Luke’s perspective, involves a lot of forethought and a willingness to approach a problem from an unusual angle, to look at solutions that may – on the surface – go against conventional wisdom or traditional thought.
What is that if not hacking?
“I’ve never been one to do things the way other people are doing it just because it’s the way it’s usually done,” he tells me. We’re sitting at a Bob Evans across the street from his office. He’s eating a bowl of oatmeal, extra pecans, extra blueberries, extra brown sugar. There isn’t an ounce of fat on him and his suit is immaculate, just the kind of thing you’d expect a guy in finance to be wearing. What you may not expect is that he bought it from an outlet mall and had it tailored. Total cost – about $500. The less successful people in his office probably pay five or ten times that amount for their suits. But Luke knows the suit is just a uniform – not a status symbol – so why pay more?
He’s not a guy who falls too hard for the conventional.
In his book, “The 52-Week Low Formula” (Wiley, 2014), Luke lays out the principles that he has developed over the course of his career that help him create extra-ordinary value for his clients by identifying undervalued stocks and diversifying in such a way to protect people’s money. It’s not so much a formula as it is a formulaic means of approaching a problem. It’s similar to the way Luke’s hero, Warren Buffett, approaches investing, but focused on the individual rather than the world. There are five filters that help him narrow down the 3,000 (or so) publicly traded companies to 25 and practical and experimental evidence suggests that they work. In backtesting by independent research firm Morningstar, Luke’s 52-Week Low formula has outperformed the S&P 500 by more that 30%. But perhaps more impressive is the way his approach has insulated his clients from bubbles like Tech stocks in the late 90s and real estate in 2008 by identifying undervalued companies primed for a comeback and riding them for short, prescriptive periods of time.
It’s helped him step away from an industry of industrial grade sameness. While many advisors pride themselves on service – sending flowers on birthdays and gifts at the holidays – Luke has been able to differentiate his value to clients in terms of performance. He doesn’t promise astronomical returns – though they often happen – but he promises to remove the confusion and stock-chasing panic that leads some people to disenchantment with his industry. It works for him, for his clients and for anyone who follows his logic. But what’s most interesting is the obscure 17th Century mathematician that inspired his approach.
“I was reading a ‘Margin of Safety’ by Seth Klarmann when I was in my 20s,” Luke says, “when I came across this quote from a guy named Jacob Jacoby that changed the way I look at almost everything in my life.”
Jacobi was a mathematician living in Germany in the 1600s when he published a paper that would help define modern calculus. In it, he postulated that the most valuable way to solve a problem is to imagine all non-desirable outcomes and the steps that lead to them, then (basically), do the opposite.
“Inverse, always inverse,” Luke says. “Its the way I approach everything. If I want to have a good marriage, I think of all the things that could lead to a bad one – infidelity, dishonesty, disrespect – and do the opposite. If I want to have a healthy heart, I identify all the things I can control that would ensure I have a bad heart and avoid them – smoking, getting fat, eating poorly.
“When it comes to investment strategy, I follow the same way of thinking. I imagine all the factors that would lead to instability, overpricing and losing money and find the opposite,” he says. “It’s not that I have a magic ball – there is no magic ball. I can’t see the future. But I can identify all the risky indicators and avoid them.”
To that end, Luke has never owned Apple, never fought to get in on an IPO. Instead, he finds companies that are being overlooked, assesses them through a disciplined filtration process and buys them when they’re at their lowest price in the last year – their 52-Week Low. He buys 25 at a time and every six months resets his strategy. This way, he’s always looking where other people aren’t and, nearly 80% of the time, doing so pays off – the companies he buys bounce back.
It’s the opposite of hitting the Wall Street lottery or knocking a grand slam out of the park. It’s stepping up to the plate and hitting singles more times than you strike out. It’s the investment equivalent of what Michael Lewis wrote about the Oakland A’s doing in “Moneyball.” It’s deconstructing the problem with the way people typically invest, looking for a solution and having the courage and discipline to pursue that course of action while Jim Cramer and the talking heads are shouting otherwise on TV.
Jacoby’s axiom would help revolutionize modern mathematics, economics and thousands of strategic-minded people looking for non-conventional and efficient solutions to conventional problems.
The Power of Inversion
I love the movie “The Princess Bride.” Maybe with the exceptions of “The Sandlot” and “The Big Lebowski,” it is my favorite movie. I’ve watched it at least every year since junior high and it seems like every time I watch it, it gets better. I love the characters, the humor, the inside jokes and sideways glances. And in a movie where every scene is cinematic gold, my favorite is the standoff of wits between Wallace Shawn as Vizzini and Cary Elwes as The Dread Pirate Roberts.
Vizzini is a cunning swindler who has kidnapped Princess Buttercup. Roberts a dashing mystery man hidden by a black mask and a big reputation who is in pursuit of the princess. He has already bested Vizzini’s swashbuckling swordsman Inigo Montoya in a battle of skill and the giant Fezzik in a battle of brute strength. Vizzini has neither skill nor strength, so The Dread Pirate Roberts challenges him to a battle wits, pouring two glasses of wine. Roberts challenges Vizzini to decide which goblet he poisoned with iocain. What follows is a four minute debate that is pure comic genius. And (spoiler alert) in the end they both drank from their goblets. Vizzini falls over dead and the princess asks the pirate how he knew which one Vizzini would pick.
“I didn’t,” he said. “I’ve spent years developing a tolerance to iocain for just such an occasion.”
The Dread Pirate Roberts understood the value of inversion – of starting at the end and working your way back to the beginning.
It seems counterintuitive, counterproductive even, to follow Luke’s path and attempt to solve problems by looking for all they ways they can’t be solved, but his approach of working your way backward from what you don’t want to have happen is something you learn to do from a very young age.
Every elementary school kid has stared at his or her desk and tried to navigate their way through a maze. Those kids start off doing what everyone does – they put their pencil on the start and begin exploring through the twists and turns. More often than not, they end up with half-erased lines and a messy paper. Then some of them will figure out that they don’t need to put their pencil down and begin tracing the possibilities with their finger before committing to a mark. But the most strategic thinkers among the pupils understand that the end dictates the means and begin working their way back toward the start from the end.
When it comes to creating digital and content marketing strategies, it’s easy to think like a first grader and start from the beginning. This might mean starting specific channels or platforms, an e-mail program or existing website and trying to figure out what to do with it. You try things, you experiment and you look at measurement that broad and vague but fit the platform. You might look at traffic for a website or open rate for an e-mail or social following. But isn’t that a little like measuring the length of the lines you drew on your maze without really knowing how to get to the finish?
Before you can know whether video content is going to be more effective than written content or whether Facebook is a better solution than Twitter, you have to have a clear picture of what you are trying to accomplish – or, as Jacoby might have thought about it, what you don’t want to accomplish.
No marketer likes to waste money. In a day and age when budgets are already fractured and fragmented, we’re always looking for new ways to drive results. So why, then, do we constantly fall for the latest fad? How is it that we allow ourselves to be constantly chasing the latest social network, platform or tool?
Because we’re always looking for a breakthrough.
The next time you’re on Amazon, search the term: “Diet Plan,” “Diet” and “Diet Pill.” Just those three searches return more than 200,000 results. Nearly a quarter of a million products, all designed to tap into our push-pull relationship with our weight and body image. But, don’t we all know the things we need to do to get in shape? Don’t we know that skipping the fast food and eating broccoli, getting off the couch and working up a sweat will get us moving in the right direction?
Of course we do. So, why then are there so many products on Amazon?
Because we’re always looking for a breakthrough.
But at least with your diet you know what you are trying to achieve. You might be looking for a shortcut or a jump start, but you have an end game in mind – looser pants, higher esteem, generally better health.
In the digital space, we too often buy the pills, the plans and diets, but we don’t know if we want to loose weight or rotate our tires. In that way, it’s easy to see why we might continue to try new things – new routes from the start point of our maze. To the person who doesn’t know where they are going, every path looks like the right one.
Constantly chasing fads or adding platforms to your digital footprint might keep busy and it might even get your brand some attention in the press, but it doesn’t mean you are getting to the goal. If you want to drive business results, focus on business results. Design strategies and find the right tools to making them come to life. It’s not a question of figuring out how your brand should show up on YouTube or Facebook, it’s a matter of figuring out how YouTube and Facebook can be used to deliver results for your brand a good experience for your users.
Luke Wiley could have made a nice living and a career out of the following the crowds. When the market was good, he could take credit, when he was bad he had a scape goat. But following the crowd was not Luke’s end game, he wanted to deliver value. And he knew that delivering value meant figuring out all the things that could destroy value and avoiding them.
You should do the same thing when you work on your digital strategy. Identify all the things that would make your program ineffective, inefficient or, worse, ordinary and that factors that will guarantee that those things will come true. You’ll find doing so will reveal the path forward, just as sure as you should never fight a land war in Asia and should never gamble with a Cicilian when death is on the line.