Pursue the knowable

I founded Stone Sentinel Capital (SSC) as a family office to manage my own capital and share my investment approach with others.

My investment journey has been largely self-taught. It would have been less prosperous if not for the generous investors who have shared quality resources freely.

Perhaps it is wishful thinking that I can contribute to the pool of quality knowledge meaningfully. If I fall short, I am consoled by the benefit of writing for myself. Who knows what foolish thoughts lay in this writer before pen is put to paper.

This augural letter explains the key principles guiding SSC's investments. Going forward, I plan to publish once per calendar quarter, with additional timely communications if unusual circumstances warrant.

The name "Stone Sentinel" draws inspiration from Chinese folklore, specifically the military strategist Zhuge Liang (诸葛亮). He was said to have created an impenetrable military formation known as the Stone Sentinel Maze, whose tactical superiority was beyond question.

In investment terms, this formation parallels the ideal investment thesis – an absolutely indisputable argument that provides complete certainty.

Yet, like the legendary formation, absolute certainty in investing is mythical. We can only strive to approach it as closely as possible.

One way is to focus on the knowable. 

Do what can be known. Otherwise, don't.

Consider this real-world example: The Coca-Cola Company sells 1.9 billion servings of drinks daily. How many will it sell tomorrow? More importantly (and a more fun question), how much would you wager on your answer?

Before responding, you would likely want additional context. Is the 1.9 billion figure a daily, monthly, or annual average? What were yesterday's sales? Do certain days consistently show higher sales? How do sales patterns vary across the company's 200+ country markets?

The complexity of these questions makes precise prediction nearly impossible. You won’t bet big that you would be right.

Now consider a different question: Will Coca-Cola sell more than 1 billion servings tomorrow?

Assuming the 1.9 billion daily serving figure is current, you would likely answer "Yes" with confidence and be willing to place a substantial bet.

Why? Because any number above 1 billion would prove you right – a much easier target than predicting one specific number.

In investing, knowing which questions to answer matters more than what you know.

Always choose the easy questions. Avoid the hard ones.

In practice, most questions in investing are challenging to answer with certainty. Find the easy questions.

Many investors believe profits depend on accurately predicting the future. However, this view is incomplete. Profits depend on which version of the future you need to be right about.

Profits that require predicting one specific version of the future – like the exact number of Coca-Cola servings – are elusive. Instead, profits flow more reliably from predictions that hold true across multiple future scenarios – like Coca-Cola serving more than 1 billion drinks.

In future letters, I hope to illustrate how I focus on the knowable and easy questions.