Hopping the Pond

I am navigating all the hoops involved in country and continent hopping. I did it in the other direction in 2008, aged 28, when all I had to do was pack a bag and jump on a plane. That, and get permission. In a world with borders and restricted movement, I had to get a work visa based on qualifications, language, age, and proof that I could self-support. Like borrowing money, where you need to prove you don’t need to borrow it. In the other direction, I am a citizen. This time, the lottery of birth works in my favour. My British wife is going through the process of getting a visa. Thanks to Social Media, in many ways I never “left” South Africa. During Lockdown, does it matter if you are reading Sindile Vabaza’s musings on your computer in the Cotswolds or in Claremont? In other ways, I have been a Scatterling of Africa and am returning home. Everything is temporary. The body regenerates every 7-10 years. We choose what we want to keep, what we want to discard, and what we want to add. Reinventing. Reinvesting. This time, I am “not leaving” the UK. I am not leaving the old colleagues, clients, neighbours, artists, dancers, yogis, family and friends who are not defined by the random location they were dropped on this planet.

Putney, London, United Kingdom, 2008

Nothing Pie

There are a few hard truths about investing. The market is both noisy and irrational, and making good decisions is not the only factor in success. It is not even the main factor. The father of Fundamental Investing (“Security Analysis” Benjamin Graham 1934) only outperformed passive investment by about 2% over his career. Making alpha (outperforming the benchmark) your goal is incredibly dangerous. It opens up an existential crisis where an entire career can factually (by your own definition) have added no value. You cannot eat alpha. Alpha on nothing is nothing. 100% ownership of a 10% alpha generating nothing pie is nothing. Often the conspicuous success of investors is based on (1) inherited wealth, (2) big salaries, (3) sales, and (4) fees. The main factor in wealth creation is saving and reinvestment. Getting money a job. Making sure that job adds value. Reinvesting the money money makes. It is not about you, how smart you are, or whether you see the matrix. I am not Neo. You are not Neo. No one is Neo. The world is complicated, ambiguous, and random. There are no heroes. We are all just doing our best.

Take as much as you like

Rules of the Game

Money is made by being able to clearly identify, articulate, and solve problems for decision makers with money. Solving problems requires skills and knowledge, and that is what we traditionally think of as meritocracy. That is not the whole story. Two key factors besides problem solving, are capital and containers. Capital is fungible. It can be allocated (by a decision maker) to any problem, and is not defined by skills and knowledge. Instead, it acts as a buffer and an engine. A buffer to reduce noise and increase the timeframe for planning (ends hand-to-mouth survival decision making). An engine to fund good ideas that are not good business ideas, and to generate more capital. A container is how you get paid. Once the ideas stop bouncing around, how does money move into your account? When? How much? A container is the reason you solve the problem, and not someone else. A container is the rules of the game. The world as it is now. The barriers to entry. The barriers to exit. Making money is not just about ideas, or skills and knowledge. Problems get solved with capital in containers.

Song Dynasty Football

Home for Bees

Two concepts I am progressively incorporating into my investment philosophy are Rewilding and Biodiversity. My Father-in-Law is a Natural Beekeeper and I like the idea of Natural Stockkeeping. Recognising that it is the bee that does the work. Where the goal is to do as little as possible, but not less. You have a roll, but it is more custodial. As we are grappling with a world that consumes too much already, yet is still struggling with mass poverty and hand-to-mouth living, we have to come up with new stories. In “Stubborn Attachments”, Tyler Cowen talks about twisting the maths of finance to not excessively discount (ignore) the future, and to focus on Maximum Sustainable Growth. David Attenborough reminds us of the seemingly obvious observation that something is only sustainable if you can do it forever. One measure of growth that is dangerous is activity. Doing more is not always doing better. Controlling more is not always doing better. Sometimes we can do better, without doing, and releasing the potential outcomes.

When All Thrive

Fundamental investment management is the simple idea that the job that money does matters. You can trade anything with a pulse. Buying and selling based on a moving price, without even looking at what the price is connected to. Speculating on whether the price is going to go up or down. With fundamental investing, it is the underlying business that does the heavy lifting. A share is a slice of ownership in a real business with real products solving real problems. The price is not just a good or bad deal. Buying or selling is not a way of tricking other people. The price represents Capital that the business is custodian of. If the company handles the complex, random, and ambiguous world in way that solves problems creatively, it should be able to create value. It ceases to matter whether other companies do well or badly. Adam Smith’s great insight was that Capitalism can be Win-Win rather than a battle between Nation States. David Attenborough points out that Nature’s great insight is that a species can only thrive when those around them thrive.

What we do, matters

Not Good Enough

When the default is to work full-time for one company, that becomes the container into which we direct most of our energy. I think you get a maximum 4-6 hours a day of really good quality creativity. Where you dig deep into the unique path that has led you to where you are, and connect interesting dots of the paths that have led everyone else to you. The values of the container matter. Lots of businesses, communities and containers discuss “Values” to create an inspirational glue for team members. Often it is platitudes like Excellence and Accountability. That can be a hubris factory. Creating, and sustaining, the idea that those in the container are better than those outside the container. Schadenfreude in the failure of others, and a lack of genuine self-reflection as you defend the illusion of superiority. It is dangerous to categorise others into “good enough” and “not good enough”. We seldom have a complete picture of the story of others. The ability to see them. Relative thinking and comparison is often just a reflection of the voices in the heads of those doing the judging. The voices telling them they, themselves, are not good enough.

Self-Contained

Panning for Gold

My oldest brother used to love (as a Medical Student) asking, “What do you call a Medical Student who gets 50% for their final exam?”. The answer is Doctor. It is only in the classroom setting where the false laboratory conditions allow us to weigh and measure everybody. You can even ask university level questions for 2 marks to separate the first and second place 12-year olds who are getting everything “at their level” right. In the real world, meritocracy is limited by the fact that no one cares how clever you are. It is not about you. They want their problem solved. If there is an over supply of problem solvers, you do not have to pay them very much. As more people can read, write, think, create, and exchange ideas, it gets harder to pretend the barrier to wealth is merit. The barriers are not skills and knowledge. The barriers are the containers. Rather than survival of the fittest, it is survival of the most flexible. What is the container in which you make money? Why can’t others make money in that way? What if that container no longer existed?

The Gods Envy Us

One of the challenges with investing is when to admit you were wrong. If your goal as a stock picker is to do better than just investing blindly in everything on offer (an index). History is, at least, compelling enough to know that outperforming in 60% of your decisions will raise you to the status of demigod if people give you the credit. But if you underperform more than 50% of the time? If you underperform the benchmark over an extended period? How long is long enough to take the blame? Performance is noisy, which gives lots of space to hide. Going to Zero ends the discussion, but lots of companies stutter along. Max Plank reminds us that Science progresses one funeral at a time. Death is a feature, not a glitch. So how do we know when it is time to let go of beliefs? How do we ensure that we are not so tied to our stories, that we serve them, rather than them serving us? How do you maintain a sell discipline?

"They envy us because we're mortal, because any moment may be our last. Everything is more beautiful because we're doomed."