Hi again and welcome to another episode of the Operation Saylor. This is update number 23, corresponding to May 2024.

If you are reading this for first time, you might want to check Episode 1, where my plan and details are explained. That will get you in context.

Hello again, and welcome to a new episode of the series.

Today I want to continue with my thoughts on measuring performance that I started in the previous episode. Last month I discussed about risk and return to make the point on how we need to make comparisons using both of them if we want such comparisons to be relevant and useful. I also introduced the idea of performance only being truly understandable along the time dimension. It's not only the end result, but the state of the operation during all of its lifespan that should be accounted for. Finally, I made the point on how a naive comparison against a simple DCA just doesn't make sense.

This month, I want to continue the conversation by presenting two metrics that are key for our performance measuring exercise, and that I monitor every month even if I don't always report them in our monthly updates.

The first metric is quite straightforward. I call it exit value.

Exit value would be the financial outcome resulting of me cancelling the loan on any given day by selling whatever was needed from the Bitcoin stack. It's a metric that can be computed at any point in time, since my loan can always be repaid early and in full. The rough formula would be:

Exit Value = (€ Value of Bitcoin Stack + € Value of Euros Stack) - (Outstanding Principal * 1.01)

The concept is simple, right? What would be left for me if I change plans and chicken out of Operation Saylor. If on any given day the value of the Bitcoin I hold is larger than the 101% of the outstanding principal, the exit value is positive, which means I would come ahead with some extra value. On the other hand, if my Bitcoin stack is underwater and can't cover the outstanding amount, the exit value is negative. This reflects that I simply can't kill the loan just with the stack, and that I could either surrender to that or put more money out of my pocket to cover the difference. In this case, the outcome would be net negative for me.

Okay, now that hopefully you get the idea, let's take a glimpse at how Exit Value has looked like so far through Operation Saylor:

The story tells itself pretty much: Operation Saylor stayed under water for a bit at the start as the bear market touched its bottom, and then we've been going up. It's been long now since the exit value has been negative.

In the previous episode, I used the easy-peasy and plot-twist scenarios to illustrate two scenarios that end with the same balance but take very different paths during the lifespan of the Operation. Now that we are on the same page on the concept of Exit Value, the conversation becomes more fluent: the easy-peasy scenario is easy-peasy precisely because it holds a positive exit value all the time. The plot-twist scenario, on the other hand, is a painful path to success because I wouldn't have enjoyed that nice exit value situation.

Summing things up: positive Exit Value over time, good. Negative Exit Value over time, bad.

Finally, let's look at the second metric. Any two courses of action or scenarios could have different shapes of Exit Value. Comparing them is an exercise that you can do in many ways. Personally, my simple and quick shot at this is to run the integral of the Exit Value over time, which leads to a simple, single value that summarizes things nicely. If you are not mathematically inclined, simply think of it as: the more time I've stayed with a positive Exit Value, and the higher it was, the better. The more time I've stayed with a negative one, and the lower it was, the worse. The integral pretty much sums both facts up into a single number.

I'm not going to plot this now for you since the integral only becomes interesting when compared against some other scenario. We will leave that for further episodes.

I'll leave it here for today. I hope you found the episode interesting and that these concepts help you better assess your own options. As always, thanks for reading and I'll see you next month.