Hi Investors,

As many of you know, my undergraduate degree is in physics. Because of that training, I tend to derive ideas from fundamentals whenever I can.

Recently, I picked up a book from my local library — Making Things Move by Dustyn Roberts. In the opening chapters, the book revisits the six classical simple machines: levers, pulleys, wedges, screws, wheels, and inclined planes.

What drew my attention wasn’t the machines themselves, but the idea of amplification.

By increasing the length of a lever arm, you can lift heavier objects. By configuring a pulley system, you can lift a load many times heavier than the force you apply. Mechanical systems allow you to multiply what you can do.

Of course, you don’t get something for nothing. There is always a tradeoff.

In physics, we know that:

Work = Force × Distance

Because of the conservation of energy, total work remains constant. If you want to reduce the amount of force required, you must increase the distance over which that force is applied. A pulley lets you lift a heavier weight — but you must pull more rope. A longer lever reduces the force required — but the input side must travel farther.

Mechanical advantage is real. Free energy is not.

This same principle applies directly to investing and wealth building.

In finance, we are constantly searching for return amplification — ways to generate more output from the same amount of capital. But just like mechanical systems, higher returns never appear without a corresponding tradeoff.

To increase returns, we inevitably exchange something else:

Leverage (Debt): Trading flexibility for amplified outcomes
Borrowing allows you to control more assets with less capital, magnifying gains when investments perform well. The tradeoff is reduced flexibility: required payments must be made regardless of performance, losses are amplified alongside gains, and excessive leverage can permanently impair capital if outcomes move against you.

Time: Trading patience for compounding
Compounding is one of the most powerful amplifiers in finance. The longer capital remains invested, the larger the eventual outcome becomes. The tradeoff is patience — investors must commit to long holding periods, remain invested through market cycles, and resist interrupting the compounding process during periods of volatility.

Concentration: Trading stability for asymmetric upside
A concentrated investment allows a single exceptional opportunity to meaningfully outperform a diversified portfolio. The tradeoff is increased volatility and the possibility of permanent loss if the investment proves unsuccessful. Greater upside potential comes paired with greater dispersion of outcomes.

Liquidity: Trading accessibility for return premiums
Highly liquid investments offer the comfort of immediate access to capital. Illiquid investments often provide higher expected returns precisely because investors must give up that flexibility. The tradeoff is simple: the more difficult it is to exit an investment, the greater the compensation investors typically demand for holding it.

Skill and Effort: Trading convenience for potential excess returns
Passive investing offers simplicity and minimal time commitment. Pursuing higher returns through active strategies — sourcing deals, analyzing businesses, or operating companies — can generate excess performance, but requires research, judgment, sustained effort, and the acceptance that mistakes are inevitable.

Together, these tradeoffs reinforce a simple principle:

Most investors spend their time searching for the perfect strategy — one that delivers higher returns without additional cost. In reality, that strategy does not exist.

Wealth building is less about finding a free lunch and more about identifying which tradeoffs you are best equipped to handle. Some investors can tolerate long holding periods. Others can tolerate volatility. Others are willing to invest time developing specialized expertise. Still others are comfortable using leverage responsibly.

Your personal “mechanical advantage” in finance comes from leaning into the tradeoffs that don’t break you — but might break someone else.

Because in both physics and investing, the rule is the same:

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_{Educational only. Not investment or tax advice.}

Ray Dalio recently reported that much of the S&P 500’s 2025 gains came not from real growth, but from the dollar quietly losing value. Reportedly down 10% last year!

He’s not alone. Several BlackRock, Fidelity, and Bloomberg analysts say to expect further dollar decline in 2026.

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_{*Based on Masterworks data. Investing involves risk. Past performance is not indicative of future returns. Important Reg A disclosures: masterworks.com/cd.}