2022 · Founding Note
Why I Wrote the Rules Before I Needed Them
A note on dating: everything else in this archive is published the same day it's true. This one isn't — I didn't start writing dated letters until the account already existed, so this is a retrospective account of how it started, written now and clearly labeled as such. I'd rather admit that plainly than backdate something to look like it was written in real time when it wasn't.
AEA Capital Research started with $500 — saved earnings and gift money, not a windfall or an allowance. That part is simple. The part worth explaining is why the first real thing I did with that $500 wasn't buy a stock. It was write a document about what I would and wouldn't do with it, before I owned anything at all.
The problem I was trying to solve
I'd watched myself make worse decisions under pressure than I made sitting calmly beforehand — that's true of most people, not a special insight. The expensive version of that shows up in a portfolio: you tell yourself a story about why this time the oversized position is fine, why this time you'll sell if it goes against you, and then the moment arrives and the story changes. The only fix I trusted was to write the limits down before I had a position to defend, so that a future, more emotionally invested version of me would have to argue with a document instead of just his own judgment in the moment.
That became the Investment Policy Statement: position caps, a bucket structure, a sell discipline, and a benchmark I'd actually be held to. It's been revised since — the caps and buckets you see today aren't word-for-word what I wrote first — but the core commitment hasn't changed: rules set before the moment of temptation, reviewed on a schedule, not rewritten quietly whenever they become inconvenient.
What I can and can't tell you about that period
I can tell you the amount, the general reasoning, and the fact that the IPS came first. What I can't do honestly is reconstruct exact dates, exact early trades, or exactly how confident I felt in the moment — I didn't document it in real time the way I document things now, and I'm not going to invent a more precise memory than I actually have. That gap is itself part of why the site works the way it does today: every letter since has been dated and published close to the moment it describes, specifically so this problem doesn't repeat.
The rules aren't supposed to feel necessary in the calm moment you write them. They're supposed to still be there in the moment they stop feeling optional.