Thursday, January 17, 2019

Old Scripts

We speak too quickly for each word to be a conscious choice. The stream that bursts from us comes from deep beneath the surface. A reaction from within. We recognise the situation we are in from situations we have been in. From situations that have repeated themselves into our muscle memory, or burnt themselves into us through sheer force. Seeing things from other people's perspectives is so hard, in part because we haven't had their experiences, but in part because it is so hard to "unsee" what we have experienced. As the experiences soak in, we can forget them but they don't disappear. Accessing the scripts that drive us requires patience. It requires calm. It requires doing the work. This is why honesty isn't just letting down barriers. It is also making time. Understanding can't be forced.

Wednesday, January 16, 2019

First Aid

I believe in Engine and Buffer building. In snapping the idea that people are productive assets defined by the work we do. A Buffer is some Capital that you have built up, that means that you are no longer living purely hand-to-mouth. It provides breathing space and resilience. It means that bumps don't break you. A sufficiently big Buffer, unused, can start to grow into an Engine. An Engine is a Muse. It earns the money so that you don't *need* to. It doesn't mean the work you do might not still make money, but that money becomes a bonus. You could choose to completely focus on something that doesn't make money. Like raising a family, creating art, or working a country mile from a wallet. Like putting in a chunk of unpaid time, that might one day lead to an opportunity to work in an area you would love to be.

Step One is more pragmatic. Step One is First Aid. You have to stop the bleeding. Apply pressure to the wound. The pumping heart of Financial Security is that your Ins are bigger than your Outs. There is a minimum amount you need to survive. If you don't have that, any idea of putting some aside is a hypothetical campfire story. Far too many people on this shared rock are not even at that point.

We spend a lot of time in Dreamland. Thinking of where we want to end up. I believe it is all about the base. The deep underlying confidence that you will be okay. Some of us are lucky. We come from communities where we know that to be true. The bank of Mom and Dad stands ready to step in. Friends and Family have spare rooms. Spare couches. A web of people care about us and stand ready to pick us up if we fall. There are jobs we could get at the drop of a hat, but don't, because they are "beneath us". We can move to cheaper houses. We can move to cheaper areas. We have options. A lot of people have no options.

Even if you have options. I still believe it is all about the base. Start where you are. Take control of the bleeding. Make sure you can get the Outs less than the Ins. Then start to build a Base. A floor to the worst case scenario. Grounding. Then you can explore. Then you can shoot for anything you want.
1. Stop the Bleeding
2. Build a Buffer
3. Build a Base
4. Build an Engine 

Tuesday, January 15, 2019


As the world becomes connected, our stories become more detached from our daily realities. When you in a small pond, pretty average people get to lap up the glory of being the biggest fish. Then that protection falls away. As Global and Local mix, the benchmark for being the "news maker" gets higher. The "good life" pushes to the edges. Unless we let go of comparison. If we celebrate good enough. If we celebrate mediocrity. If we celebrate the things that are on the menu. There is nothing wrong with being gloriously average. Spectacularly unspectacular. Unless the stories we consume make us think our lives aren't good enough. We can raise the profile of simple. Of affordable. Of plentiful. Of thinking inside the box. Rare and unique raise the price of things... not the value. Price is just a clearing mechanism. A measure of how much there is of something. That is a very bad measure of value. Success needn't be about setting yourself apart.

Monday, January 14, 2019

All About the Base

It's easy to tell a story that seems pre-planned after the fact. At 19, I was living in the UK while waiting to start University and I felt very constrained by money. Mud Island is expensive. Especially when you are thinking in Rands. I chose to study something that would help me understand money so I wouldn't be under its control. I studied Risk, Planning and Investing. Then, with some aggressive practicing what I preached, I eventually decided I had enough to live simply. My money could work for me, rather than me working for money.

That makes a great story. It is mostly true. Along the way through, my path could have gone in several other directions. I actually really enjoyed the work I was doing most of the time. I am just rather contrarian, and rather stubborn. When things don't work, I am not very good at just playing the game and doing what I am told. When I say, 'things don't work'... I mean they didn't work in my opinion. But I am just a pipsqueak. I know nothing. I also don't or didn't have that much actual power.

In most organisations, you have to be patient. You have to play the game. In the first 100 days in any new team, it is very easy to start seeing the obstacles. There is often a burst of energy as you feel the excitement of making a difference. Bringing your unique perspective. Then gradually you realise why some of the things haven't changed. You realise why it is so complicated. You discover a whole bunch of really difficult problems hidden in between the "obvious" solutions. Then after a while someone else joins. Their "first 100 day" spark of ideas no one has thought of could have come from your drawer. Change is hard.

One of my favourite parts of my Post-Work life has been the lack of need to convince anyone of anything. My blog posts are mine. If I want to press "Publish", I press "Publish". I do that most days, and don't need to wait for permission. Working in Investments, there are lots of rules about what you can and can't buy. What you can and can't say. Compliance. Working for clients means there are lots of rules about what you have to do, and when, and for who. Your inbox can become the boss of what you do each day. Your phone can become your micro-manager.

"Aiming small" changes the rules. To go big, you have to play the game. I started paying myself a Basic Income about 4 years ago. It meant I have to restrict my spending but I got more freedom from the road. I could w(o/a)nder off into the bushes. Go small.

The approach I took is not open to all. I was incredibly lucky in terms of where I was born, the teachers I got, the support I got, the friends I met, and the stubborn competitiveness and delayed-gratification that is in my blood. What I do think is open to all is being "all about the Base". 

We don't have to aim for the big bucks. If you get used to what you have, and learn to work with that... everything else is a bonus. "Save more tomorrow" is a strategy where people commit to investing any raises or increases in salary. They don't adjust their lifestyle with their income. They get used to living on the Base.

The same can be true of working in an organisation. You have to be comfortable with the idea that things won't change. That what it is, is what it is. That is the Base. Then if things improve, that is the bonus. Acceptance is a great way of seeing the first steps that are actually on the menu.

The easiest place to start, is where you are. Then you can take control of the story from there.

Friday, January 11, 2019

Ups and Downs

In my Corporate incarnation, I once had a client telling me I was the worst Salesperson he knew. I took it as a compliment. In my line of business, as is probably true of most long-term commitments, expectation management was way more important than the sale. Airing the dirty laundry visibly and loudly made it less likely someone would be disappointed if they jumped on board.

Just over four years ago was the last time I received a steady pay-check for full-time work. Over my career, I had been an aggressive saver and investor, living well within my means. I had built what I call an Engine, that had the capacity to earn more than a relatively frugal life would require me to spend. Not by any means frugal in a global context. Sufficient to allow me to still participate selectively in my Bubble, but with much more disciplined spending. I figured reading, writing, and spending time with people was what gave me my kicks. That is all rather cheap.

The last decade has been a bizarre time in Financial terms. Governments in desperation to keep economies ticking have used one of the few blunt tools they have - interest rates. By keeping these low, the theory is 'the price of money' is low... so businesses can borrow and invest. The problem is interest is also the salary paid to Savers. People who retire often put their money in Fixed Interest vehicles. Cash and Bonds. This is also "money available" to businesses to put to work in exchange for interest. Banks and Insurance Companies act as the middlemen. This means, lowering the interest rate may benefit homeowners (cheaper mortgages) and other borrowers, but not those living off stable interest rate savings. The thinking is that borrowers will put the money to work.

I was 34 when I stopped working for money. So I was under no illusion that I would be able to live off salary like fixed interest. Unlike me, my money couldn't sit around reading books and having fat chats. My money had to work. Hard. My Engine is invested in real businesses. Through a couple of Equity Funds, and then gradually through individual companies I have selected. I now have a portfolio of 20 companies. My money doesn't earn a salary. It only grows if the companies that I have invested in grow over time.

That doesn't happen in a straight line. In 2018, the businesses I selected made me nothing (roughly worth as much at year end as at the beginning), and the biggest fund I am invested in lost just over 20%. My strategy works if I can earn (on average) more than I spend. If I have too many 2018s, then it doesn't work. 

For those who depend on fixed interest rates, the traditional approach to retirement doesn't work if you have too many 2008-2018s. When interest rates are almost zero, you are no worse off if you just keep a pile of money under your bed. Like most of us, we need an incentive to work.

I talk about Buffers and Engines. A Buffer buys you space and time. It allows you to look up and plan. It reduces panic. An Engine can actually do the work for you, so you can think of things that are nothing to do with money. What the Engine does, matters. "Fundamental Investing" is called that because beneath the numbers are real businesses. An Engine that isn't working is just a Buffer.

Normal jobs, the kind with salaries, are very similar to fixed interest bonds. Someone pays you a salary to take away the noise. The owners of the business have to deal with the stress of 20% down, or even 40-60% down, years. Clearly if they have 100% down years, then redundancies kick in. A well-run business, with a good business model, doing good work can give employees a degree of certainty. Those businesses will have Buffers for the bad years so they can carry on working through the times when no money is made.

This post is a version of 'airing my laundry'. I don't want to paint a false picture that some do of Entrepreneurial lifestyles. I believe in Buffer building, and Engine building. I believe Capital can set Labour free to work on things that have nothing to do with money. The stresses don't disappear though. They just change form.

The question I keep returning to is "How do you build a sustainable daily practice?". How do you decide what it is you want to do with your time? What you are building? We live in a world that needs financing... we have to pay the bills. The bills aren't what matter. What we do matters. The bills just have a habit of getting in the way. Crafting financial security and financial freedom, is the process of putting that stress in its place.

Doing the Laundry

Thursday, January 10, 2019

Building Something

The key to Financial Security isn't the size of your income. It is the relationship between your income, and your Engine. Capital isn't the enemy of Labour. Sufficient Capital can set Labour free. That sounds more like love to me. An Engine is the Capital you have built up to work on your behalf, so that you can think about things other than money. An Engine isn't a pool of coins... it is a slice of ownership of a real business doing real work. The key to building Capital is *reinvestment* - building something rather than spending everything. 

Traditionally, the idea of retiring comfortably (without help from family) requires building an Engine over the course of a working career. The Engine then looks after the pensioner in their Golden Years. 15-20 times the required spending is often quoted target. That means the Engine needs to earn 5-7% in real terms (above inflation). For bigger funds, 3.5% is a more "sustainable drawdown rate"... meaning you would need closer to 30 times the income you require. If the money only earned 2%, you would need an Engine 50 times the size of the spend.

What the money earns is clearly important, but it isn't the most important thing. The key to it all is how much is spent. 

One of my financial heroes is Bill Cunningham. In his words, "If you don't take the money, they can't tell you what to do". He doesn't take money for his work. That gives him the creative freedom to do whatever he believes in. He lives about as simple a life as is possible to live in New York. Check out the documentary on him on Netflix.

Someone who earns £10,000 a month can be further from Financial Freedom than someone who earns R10,000 a month (about £563). The key questions are, (1) how much less than you earn do you spend, (2) are you building an Engine that could one day earn for you. Gradually, you can build an Engine that acts as a "Mini-Me" which works for you and takes the pressure off. Gradually, you will get the option of "not taking the money". That is the essence of freedom - choice. Bill lives off almost nothing, and so needs almost nothing.

Someone earning £1,000,000 a year could have no choice but to work in a job they hate, because they have no Capital and a bunch of commitments. Our lifestyle tends to adjust to earnings, creating habits and expectations that are hard to unlearn. For less than half of that, just once, someone could have an Engine that generates R10,000 a month comfortably. Don't expect the big salary owner to have the skills to live on that. We often look for lessons in Financial Freedom in the wrong places. Rather than those with big salaries, we should look for those who can breathe. 

Wednesday, January 09, 2019

Peddling Discontent

Our imaginations are both our most powerful tool, and our greatest enemy. We can imagine change. Very specific change. We aren't capable of the level of complexity required to imagine what that would actually be like, and how we would actually get there. We struggle enough with understanding now. Our bluntest motivational tool is imagining where we want to be, that isn't here. What we want to have, that is here. I believe it starts here. Massively reducing our ambitions. Accepting where we are, then taking really small achievable steps, every day. Park the rage. Park the spinning ambition. Use your senses to really understand your small corner of the world, and be connected to those around you. Breathe. Ask. Listen. Give. Celebrate the average. Celebrate the things you have. Chip away at the obvious obstacles. No one else understands what is going on either. We are all trying to make sense and meaning of it all.

Work on the problems you can solve

Tuesday, January 08, 2019


Guangzhou has a 2,200 year history as a Silk Road port. What we think of as "The Age of Discovery" is analogous to an undergraduate University student discovering a philosopher or book they like, and thinking no one else has (literally) every read it. Cities and Ports are always evolving. Domestic (Chinese) migrants from other provinces make up about 40% of Guangzhou's 14-25 million strong population (depending on where you mark the city's edge). Until the Opium Wars forced the opening of other points, it was a single point of entry for most foreign traders. "Canton" derived from Cantão, which was a muddling Portuguese pronunciation of Guangdong (The Province which Guangzhou is the Capital of). Muslim conquests sacked and held the city for a century from 758. Following that, foreign trade came in an out of favour depending on the Emperor. Legal Trade was often restricted to tribute delegations. Eventually, around the 17th century, when the Portuguese became regulars, they were permitted to warehouse their goods at Macau instead of Guangzhou itself. Trade increased under the Canton System as the city gradually became a centre of Global Trade.