The 60 Card Portfolio- Magic: the Gathering, Investing, and Bitcoin
Magic: the Gathering and investing share a lot in common. They’re both fundamentally games of managing risk that require assessing a changing environment, predicting an adapting metagame, choosing and optimizing a strategy, all while executing and surviving mistakes.
Welcome in fam, much love, Trav here. If you don’t know me, I was a professional MTG player, content producer, and performance coach for a number of years, often ranked in the top 100 players in the world, as high as top 10 overall and top 4 team overall.
Since 2020 I’ve created and used a framework based on what I’ve learned from winning MTG tournaments and applied it to the world of investing. Despite being a relative beginner and making a number of mistakes, I’ve so far not only survived but done quite well.
In the first part of this article I’ll be going over an applied framework from MTG to investing and in the second part I’ll be covering what I saw, thought, and did from 2020 to 2022, my results, and what my plan is for the coming year. I promise you that you’ll gain a new perspective by reading this. Let’s get it!
Part 1- An MTG Framework for Investing
Assessing the Environment
The first step for both approaching an MTG tournament and approaching an investment decision is analyzing the broader environment. You have to look at all your options and how broader trends affect those options.
For MTG assessing the environment means looking at all of the available cards you’re allowed to play. A step further is looking at the cards and effects you aren’t allowed to play. The MTG environment is constantly changing, and it usually changes on a predictable schedule. You know when the next set is coming out and ban list announcements happen in advance of tournaments.
For investing, assessing the environment means looking at all the investment classes, but also means assessing all the macro trends and forces like central bank policy, technological breakthroughs and adoptions, pandemics, demographics, and more. The environment can change at any time. A new policy, demographic shift, breakthrough, or news event can happen overnight. There’s a lot more to manage when analyzing the world’s environment and how to applies to investing, and change happens on a more unpredictable schedule.
For either, this is the most important step, and something you need to frequently come back to assessing. What are the biggest environmental forces? Has anything changed on the macro? Miss these questions and you could later arrive at totally the wrong strategy.
Predicting the Metagame
The second step for both approaching an MTG tournament and an investment decision is predicting the metagame. The metagame is basically what the preferred strategies of other people are. The metagame describes the moves of the masses, which strategies will show out in numbers, and which strategies will rise to the top. Predicting the metagame is both predicting psychology and modeling the success of strategies in an environment. Not easy, but if you get this right you can be afforded to be much sloppier in later steps and still do great.
In Magic: the Gathering, predicting the metagame means guessing which will be the most common decks at the next tournament, and also which will be the best performing decks at that tournament. You want to be able to not only beat the more common strategies but also beat the strategies that rise to the top in later rounds so you can win the whole tournament. This requires not just correctly assessing the environment, but analyzing the last tournament’s metagame and predicting how other people will adapt for the following tournament. In MTG we call this being “next level”. Although interestingly, it’s important to be just on time. If you are too early or too late in predicting a particular metagame, you won’t be well positioned. You need to guess right for the specific tournament you’re competing in.
For investing, predicting the metagame means guessing which investment classes people are likely to flock to or rotate out of in a given environment. If you are entering an asset class while everyone else is leaving, you’re likely to lose money. If you enter an asset class right before a crowd is moving in, you are likely to gain money. While guessing correctly is important, unlike MTG you would like to be a little bit early to a metagame, so when that metagame catches on you’ll be well positioned to catch the pump. Timing is not everything, but it’s important.
When predicting the metagame you need to be asking the right questions. Given the environment, what will people be doing? Given what people have been doing, what will they do next? If one strategies starts to dominate, what will be the next strategy people will move to? What do I need to do and where do I need to be to take advantage of the movements of the masses?
Analyzing the Tournament Structure
The tournament structure is a place where MTG and investing share a lot of dissimilarity. They are both fundamentally about managing risk, but the incentives for how to manage the risk is very different, and what it means to win is also very different.
To break through in MTG you need to be in the top .5% of a tournament or better to make it to the next level. You might need to be in the top 8 out of 2,000 competitors to win a meaningful prize. This is extremely difficult. You basically have to hit a grand slam. The good news is that it doesn’t matter how many times you strike out. No one counts. It doesn’t affect your ability to come back to the next tournament to start in the same position. You get as many tries as you want. If you break through and move on to the pro level, the risk / reward profile is slightly less extreme, but you still need to be finishing in the top 5% occasionally to stay on the train. Spikes are heavyweight. Strikeouts still aren’t counted. Consistent decent results might not be good enough. If you win more than you lose, but you never hit a home run, you blow up.
In MTG the tournament is made up of individual games that are black and white. You either win or you lose. It doesn’t matter how close the game was. The tiniest edge is the same as a blow out. A win is a win, and a loss is a loss. In other words, approaching MTG tournaments generally encourages maximizing your risk and not worrying too much about your downside.
Investing is almost the opposite. What’s important is you win more than you lose and you survive. You don’t need a home run to make it, but a strike out can cost you dearly. If you lose too badly or for too long, you could be out of the game entirely and there is no next tournament. Game over. And the stakes are much higher. This is your money and your future. To make it over a sustained period in investing you need to be risk averse. Yes, you want to have a high upside, but it’s more important to optimize for minimizing your downside. If you blow up once, it could mean being out of the game forever. The thing to always keep in mind is making sure you simply survive.
Questions to ask-
What does it mean to win? What does it mean to lose? Can my strategy survive any scenario? How can I minimize my downside?
Picking and Optimizing Your Strategy
Now it’s time to pick your strategy, and then optimize your strategy. If you did the previous steps correctly, it should be simple to arrive at a strong strategy and not that important to optimize it. Of course, you should spend time optimizing your strategy, but you will get much better returns studying a bigger picture to make sure you arrive in the correct place.
In MTG you need to pick the best strategy for a particular tournament. That tournament has a particular broader environment and a competitive metagame. The best performing players in MTG will bring a different strategy to each tournament depending on what the best strategy will be for that particular tournament. They aren’t married to a particular strategy. There are strong players who always pick the same strategy, but their habit of sticking with their pet eventually costs them. For instance, one of the strongest control players in the world, Guillaume Wafo-Tapa, only plays control decks, and despite a few top finishes, after a period where neither the environment nor the metagame accommodated his strategy, he was unable to adjust and fell off the Pro Tour. Personally, my best performances at the highest level came after I gave up my preferred strategies and started playing whatever was the best. You can choose the exact right 24 lands and 36 spells of your MTG deck, but if that strategy is fundamentally flawed for the times, it just doesn’t matter. In Magic, it pays to be versatile and adaptive. It’s better to be generally correct.
The same is mostly true for investing, with a few key differences. The first difference is that while in MTG the tournaments have delineated start and end times, the markets trade year round, which makes it more difficult to identify that you’re in a new metagame in a new environment, which makes it even more important to keep going back to the initial steps and surveying what’s happening and what’s changed. A second difference is that in MTG you can’t allocate more than 100% of your portfolio to something, but in investing you can take out debt and do exactly this. In investing you have a lot more options of how you weigh your strategy and risks within. A third difference is that in the investing worlds you pay capital gains taxes for changing from a winning strategy. To minimize taxes and simplify their strategy, many people will try an all weather portfolio, such as 60 / 40 stocks and bonds or dollar cost averaging into the S & P 500 and never adjust. The problem is that over a period of years or decades, the environment and metagame can change so much that the world is unrecognizable. For instance, the gold price today the same as it was 10 years ago. Gold was once one of the best investments but has not been performing for a decade. Why? Because the environment changed. Like MTG, a common mistake investors make is to spend way too much time optimizing their portfolio. If your strategy is wrong, this step hardly matters, you will lose. And if your strategy is generally correct, you will tend to do well regardless.
Questions to ask-
Is this the right strategy for the current environment and current metagame? Am I adapting to changing times? Am I spending too much time optimizing and too little time studying the bigger picture? Am I too attached to my current strategy?
Executing Your Strategy
In MTG and investing, you will make mistakes. Lots of mistakes. So many mistakes. So many different categories of mistakes! You will make mistakes when you assess the environment wrong, predict the wrong metagame, interpret the tournament incentives wrong, have the wrong timing, pick the wrong strategy, pick the right strategy but execute it wrong, and much more that you aren’t even aware of. You don’t know what you don’t know, but what you do know is that you will make lots of mistakes.
Dwell on your mistakes long enough to learn a lesson, and move on. There’s no benefit to constantly rehearsing old mistakes. Rehearse what you should have done instead, and then do that next time. Get your head back in the game, focus on the next move, the next play, and move on.
Consider what will go wrong, and come up with a plan for how you will react. This way when you get in unknown or unpredicted situations you’ll be able to keep calm and have a prepared strategy to minimize loss or even turn it into a gain.
Whatever you do, make sure you survive. You will make mistakes, so make sure those mistakes don’t blow you up. Minimize your losses. Cut your losers quickly and get out. Better to miss out on upside than to risk losing everything. As long as you have your stack there’s something better you can do with it than lose more. It might mean walking away for a bit and doing nothing. Survive to fight another day, and come back.
Something very important that I’ve noticed is that there is a common category of mistakes that are basically behavioral mistakes stemming from physiological mistakes caused by poor lifestyle hygiene, such as lack of sleep, drinking, and drugs. In Magic it might mean coming to a tournament hung over or sleep deprived, or with investing it might mean acting reactively or sending your money to the wrong place because you’re mentally out of it. This is a reason why you need to treat both as a performance sport where your physical health and habits do matter. It’s much easier to invest when you’re fit and sober, because your ideas and decisions can be executed at almost any time, and a mistake can be made off hours. Having discipline and impulse control to stick to your plan are paramount. You could have all the best analysis in the world but lose everything if you aren’t able to do this step. In the end, winning investments are less about analysis and more about your habits. You could get handed the perfect deck and play it incorrectly. Get the habits and behaviors wrong and you will lose, get them right and you will win.
Questions to ask-
What could go wrong? What mistakes might I make? How should I react to unpredictability? How do I ensure I don’t blow up? How can I optimize myself? How can I be better prepared to act?
Part 2- My Framework Applied from 2020 On
Now is the part where I share how I analyzed 2020 onward, what I did, and what my returns were. The truth is, I didn’t have this framework organized clearly until now, and I made many different mistakes. But I survived and outperformed. I think this is pretty good considering how many people either underperformed or blew up in the same time period. Whatever it is, it’s not financial advice. I’m just sharing my story. You might like some things about it, you might not like some things about it.
I also want to point out that I read a tremendous amount of books on investing. I read a lot of articles on the internet. I spent a lot of time on Twitter, which sometimes helped me and sometimes hurt me. I listened to Youtube. In the end, I came to my own conclusions and my own framework. This is important. Don’t take tips or do what anyone tells you. Don’t make any moves based on this article. Take a step back, organize your thoughts, and make your own strategy. All these are just ideas. Anyways, on with the story.
So I started in 2020 although I’ve watched the markets passively for many years. The first thing I noticed that was unique about 2020 was the macro environment. The biggest thing was the money printing. I knew the expansion of the money supply would lead to inflation later on, and I needed to be in assets to take advantage. I had finally gotten 100% sober the year before and was able to see this as an opportunity to take action. The other interesting thing I noticed in the environment was Bitcoin adoption and the upcoming halving event which would cut down on new supply.
I predicted the metagame would be risk-on, debt heavy, and specifically rotation into Bitcoin because of the timing event. Everything was lining up. So I took an early position in Bitcoin and even took out debt to increase my exposure past 100%. I chose to go Bitcoin only because I believed diversification within crypto would actually increase my risk, I was already taking on tremendous risk, I believe in the Bitcoin ethos, and it didn’t seem that important to optimize this part perfectly. I want to simply pick the strongest horse on the strongest team, so that’s what I did. This part went well for me. I was in generally the right place at the right time. The metagame did develop with retail entering the space, but particularly institutions piling into Bitcoin.
I noticed the metagame starting to change in mid 2021. Capital continued to come into crypto but was increasingly rotating out of Bitcoin and into random alt coins. There was almost a year long “alt season”. I chose to hold my allocation and not participate in this metagame because I was happy with my gains and didn’t want to increase my risk profile knowing that a future metagame was rotation out of crypto entirely where alts would get punished badly, I have a full time job, a relationship, a dog, and several hobbies, and I didn’t want to spend time trading alt coins, and because I don’t believe in the ethos of any of these alt coins at all. The truth is I did break down a few times and dabbled in small positions here and there, but I closed them all out quickly at relative parity. Most of my gains happened in late 2020 and early 2021, and I just held and watched for most of the following year.
At the end of 2021 I started to notice the environment changeing. The 2020 stimulus was resulting in high inflation more than a year later. At the same time, monetary expansion was slowing down. China was having problems in their credit markets with the default of Evergrande and their central bank wasn’t stepping in with liquidity like I had expected. The savings rate hit a low and new retail entrants slowed significantly. Institutional announcements started to slow down. The FED planned tightening in the coming year. Meanwhile the metagame within crypto continued to be a game of hot potato with rotating pumping and dumping alts, while the broader metagame was clearly shifting to risk-off.
So I sold. I sold ~70% of my stack. I would sell the rest, but it’s in a time locked interest account that I can’t touch. That’s part of the reason it’s in there. I know if I can just hold on to some of it through the ups and downs I’ll be set in the far future. If I sell some of it, I might never get it back. So I tied my hands on that. But I have to survive, so I sold the rest. The result is I have 20% more cash than I started with + the Bitcoin that I didn’t start with. So I’m up about 80% in a time that the S and P 500 is up 50%. Good considering how new I am, how may mistakes I’ve made, and the low risk position I’m in now.
I made a lot of mistakes. My God the mistakes. I should have moved in earlier. I should have diversified into Eth. I should have closed out my debt sooner. I should have exited earlier. I should have done many things that I don’t even know about. I’ll know more later. Maybe I shouldn’t have exited at all. Maybe my analysis is wrong, the markets risk-on again and I miss out. I don’t know now. We can come back to this later. But you know, what, I’ll say it again. Despite all these mistakes, I managed my risk and I survived in profit. I will be here for the next time.
I’m ready for the next opportunity. What will it be? Well it all depends on the environment and the metagame. I’m in wait and see mode now. If the FED tightens as planned, I’m well positioned to pick up a deflationary crash. If they flip loose, I still have skin in the game. I’m trying not to be too attached to my pet Bitcoin, but I’m continuing to watch adoption and liking what I’m seeing for the long term.
I survived and I want you to survive too. You have to work smart. Prudence, organization, discipline, and patience are critical. Be paranoid. Don’t get too greedy. You will make mistakes! But don’t let them ruin you. Learn and move on. Live again to fight another day, coming soon.
Did you enjoy this article, find it useful or helpful? Please let me know.
<3
Trav