Tuesday, January 26, 2021

Alternative Worlds

“Price is not Value” is perhaps the most important lesson to learn in navigating wealth creation, financial planning, and building a career. I constantly find myself wanting to believe price is more than it is. Feeling like the way I see the world is reality. All price is, is a communication tool between different realities. We see the world based on what we have seen. We see the world from within our self and community created containers. That is where value sits. Price is where different value systems briefly and fuzzily meet. Price is a crude tool to artificially, and temporarily, simplify qualitative ideas of what something is worth down to a number. As individuals, we can then rank and compare all the other things that come into our decision making. Then make choices based on bringing things into and out of our world, based on price.


Capital and Containers

Making money is not just based on skills and knowledge. It also requires capital and containers. Capital provides endurance and resilience. The ability to survive through waves of feast and famine, with a degree of stability. The ability to invest, unlearn, relearn, and adapt as the skills and knowledge that are required and rewarded change. The ability to absorb and accommodate shocks from expected and unexpected risks. Containers give shape and form to what we do. They are the wider context in which we operate. The laws. The agreements. The relationships. The barriers. The incentives. Containers are where the rubber hits the road, and we get paid for our potential. They hold the space for an ask to meet an offer. They allow potential to manifest. Without capital and containers, merit does not get seen.


Monday, January 25, 2021

Chocolate Monster

Lindt Chocolate does not cost the same in Oxford and Cape Town. “The Law of One Price” (LOOP) is the theoretical idea that the same thing should sell for the same price. The LOOP does not hold, because there are trade frictions. What something is does not determine its price, because price is not value. Price is a negotiation between the buyer and the seller of a thing *in a container*. The container determines the barriers to entry and barriers to exit. The container determines the story. The story determines the agreement. Money is made by solving problems for decision makers with money. The decision maker does not know everything, is not everywhere, and each decision maker has their own set of competing things that they value. More than half the battle of making money is becoming a part of a decision maker’s value recognition. “The thing” is not what determines the price.

Lindt Chocolate Cake

Messy Trade-offs

Sometimes you have to do things. If you are fortunate, what you have to do depends on what you want to do. There are realities to accept once you have figured out what you want. Trade-offs. Each opportunity taken closes doors to other opportunities. The tricky bit is negotiating through complex competing relationships and trade-offs. The deeper your network of meaningful connections, the more you have to take into account the desires of others. A lot of my anxiety comes from the managing of expectations. If no one expects anything of you, and your actions do not impact anyone else, then you can do what you want. If you cut yourself off from the world. If you engage, it is messy. A friend of mine took this approach when he started work. He said, “you have to do a good enough job that you don’t get fired, but not so good that they come back”. It is comfortable under the radar. That strategy did not last long. Eventually, he wanted to engage, and people started coming back. A life worth living is messy.

Under the Radar

Friday, January 22, 2021

Somebody Else

In my job hunting I have had many conversations with friends, former colleagues, recruitment agents, and friendly strangers on LinkedIn. Covid means I have not done the coffee circuit. I probably saw more people in week-long visits to Cape Town than I have seen in the (just more than a) month I have been properly back. Conversations move slowly. Even when there is an obvious vacancy. Corporates have to go through the process of advertising jobs, screening candidates, and rounds of interviews. I am doing the same in reverse. There are periods of silence. There are forms to fill in. People who do not turn up for calls. Sometimes repeatedly. I am still of the view that a job is a bigger deal for the candidate than the company. Someone will fill the role and the company will carry on doing its thing. As Tim Minchin says in a love song to his wife, “If I didn’t have you… I really think I would have somebody else.” For the candidate, it feels like more of a big deal. How you are going to spend a big chunk of your time. Where? With who? Tim’s point probably still holds true if you do not connect too deeply to any single opportunity. Push on with a little yogic detachment. It matters, but it does not define you.

Wednesday, January 20, 2021

Wrestling with Ideas

A good idea is not enough. Bringing a thought to reality is a complex coordination problem that requires time, resources, and connection. I have wrestled long and hard with my inner idealist and pragmatist. Learning which battles to pick. Learning the art of silence. Learning when good intent actually escalates conflict. Learning when there is no need or value in defending myself or my beliefs. And when there is. I find it interesting that in stories of the old sages, the wise old hermits that get consulted seldom do more than ask ambiguous questions. As if those who know the most are those who see the humour in it all. In my utopia, my understanding of the world is not forced on others. I am an anarchist in that way. My ideal relationships are peer to peer. But I am not submissive, and am resistant to those who wish to dominate without consent. A dance between protecting my good ideas, and letting them go enough for them to influence reality.


Tuesday, January 19, 2021

Navigating Paperwork

Pushing paper is a core part of finding your way in the modern jungle. My friend Karabo wrote a guest post for my blog a few years ago where she talked about the advantages of coming from a family that valued education. The lessons learnt at the feet of gogos and uncles. Overheard conversations and helping hands. Another friend, Tom, is a Polish-British Soutie. Understanding “Rich Country Poverty” was one of the harder things for me to wrap my head around as a South African-British Soutie. Tom told me of how he volunteers to help people fill in forms. Having navigated (and navigating) my way through applying for bursaries, getting passports, fertility treatment, adoption processes, job interviews and all sorts of paper work… this makes sense. Often asking the same question repeatedly in a slightly different way, with confidence, is needed to maintain momentum. Karabo and Tom’s observations remind me of how important believing you deserve to take the steps, and getting guidance, is in a path dependant world.

Monday, January 18, 2021

Hubris Factory

“The real secret to investing is that there is no secret to investing. Every important element of value investing has been made available to the public many times over, beginning in 1934 with the first edition of Security Analysis.” Investing is enticingly easy to monetise. You get cost centres (need money) and profit centres (make money). A good business is one where you have something that is easy to count and communicate. “I’ll grow your money” fits the bill. Pricing is also easy with, “I’ll take a percentage”. The two key elements are good capital allocation (what work the money does) and reversion to mean (prices typically overreact and true normal is less noisy). The downside of all this simplicity is that investing is a hubris factory. The real work gets done by the underlying businesses, but investors often think it is an extension of classroom exam results (which also oversimplify the process of ranking people). An Investor’s entire career of being a rock star can come tumbling down with factual evidence that they have done no better than average. They’ internalise the good times and excuse the bad. The real secret of investing and good businesses is that it is not about you. It is about putting money to work, and reinvesting. Custodianship, not proof of worth.