New World. Old Vines.

 “If South Africa wins, we all win”. Ian Naude was responding to a question about whether he supports young, up-and-coming, winemakers or sees them as competition. Wealth is made in containers around supply and demand, and the temptation is to forget that we exist in bigger containers. Wine containers. South African containers. Global containers. In “The Art of Learning”, Josh Waitzkin talks of a martial arts teacher of his who was very open with what he knew. His belief was that if other people were obsessing over what he was doing, that was to his advantage anyway. The great insight of Adam Smith was that win-win beats the gunboat approach of mercantilism every time. All containers provide is shape and form to our problem solving. They make for clear asks and clear offers. They are a communication tool, but they don’t have to define or separate us, or our learning. Secrecy is lose-lose. Grow the bigger container and we all win.

craft wines that tell a story

Solved Problem

Investing is a solved problem. As Seth Klarman points out, “the real secret to investing is that there is no secret to investing”. The unsolved problem is that most people don’t do it. Most people still live hand-to-mouth. A lot of people are stuck in debt traps which is “reverse investing”. Like the underworld of Stranger Things, you work to pay for past consumption or misfortune. Three key factors in investing are (1) competence, (2) relationships, and (3) beliefs. I don’t believe in Gods of investing. I do look out for red competence flags. You have to do your due diligence. Like romantic relationships – we form connections with people. The grass isn’t always greener. Improving our investing habits starts where we are. Our beliefs are path dependent. There is an element of this in the “how” of investing. You have to choose a path that resonates for you so you can stick to it. The basics are pretty simple. Find a way to earn. Spend less than you earn. Get the difference a job. 

too many live hand-to-mouth

 

Which Path?

We don’t choose our mother tongue or the country we are born in. Similarly, our relationship with money is path dependent. Money is not a thing. It is a communication tool. A catalyst for things that matter. That is why the conversation about wealth creation, or any creation (even things that don’t make money often need money), starts with understanding someone's relationship with money. A good financial adviser’s key job is understanding you and how you think. You can only take control over your next step on the path if you know where the starting point is. Know where you are. Know what you pay attention to. Know the container you are in. The barriers to entry to what you want to do. The barriers to exit from what you are doing. Your capacity for things not going exactly as you expect. Money is like words and numbers. It can either help you tell your story, or control your story. 

Did you choose your path?

Cut the Fat

Price is not value. Daniel Kahneman points out that while we might be intuitive grammarians, with our ears bristling when someone butchers our mother tongue, even those with years of training in statistics are not “intuitive statisticians”. Some truths require slow deliberate thinking rather than rules of thumb. Truths like there are no gods of investing. Investors who will agree “price is not value” will fall foul of this too when talking about “their value”. Everyone likes to believe they are the one that adds the value. That can’t be replaced. That other people can be cut out of the value chain, because other people are the fat. A high price is not an indication of value. It is more likely (1) scarcity, or (2) barriers to entry. An obstacle to creative destruction is that we all need to eat. We all need to get paid. We all need a source of wealth. The only way anyone will be prepared to be made redundant is if we believe we are included in the future that exists on the other side. Money is made by solving problems for decision makers. One of our problems, is that (without capital) we need problems. 

Are you the fat?

 

Fear of Success

Money is made by solving problems in containers for people with money. The key is being able to communicate with the decision-maker-with-money, in language they understand. Know who is paying. Know what they want. Know what success looks like to them.

Neville Scott has spent a career helping business leaders design solutions to problems that can be implemented. He starts his process by understanding “the School Playground”. Problems have deep histories with complex origins. Solutions to single problems have unintended consequences and layers. One problem we are all trying to solve is that we need to eat. We have to get paid. If we permanently solve the problem we get paid to solve, that can be a problem. Creative destruction is a powerful fear-inducing force, without sustainably looking after the problem solvers. 

Protagion - Active Career Management is holding a virtual conference where I will be part of a free panel discussion exploring how building buffers (for resilience) and engines (for endurance) of Capital can help ignite your creativity. Free from the fear of success. 

Getting the Cheese

The early bird gets the worm. The second mouse gets the cheese. My brothers are both Doctors. Perhaps that is why I am not. I saw the years and years of study and community service they did (and do), and decided that Actuarial Science was an easier mountain to climb. You have to pick your hard.

One observation was that while my days could be trying, no one died. Medics in your life put the hour download of a tough day at the office in perspective. They also specialised more and more. Knowing a hell of a lot about a small area of complexity. One is now a Professor of Vascular Surgery. The other is a Paediatric Cardiologist.

Maybe extending the analogy too far, someone who studied finance can still have their own career and finances in a mess. Understanding a small corner of the financial universe doesn’t make you a career coach or financial planner. Circles of competence. Asking for help doesn’t mean you aren’t competent.

Protagion - Active Career Management is hosting a weeklong virtual conference (#ProWeek) with some free sessions, and some sessions exclusive to those subscribers you have asked for regular support for their career choices.

Active Career Management

Money laundering is when criminals try place their dodgy dealings in the financial system so they can spend it. A big part of the fight against this form of crime revolves around tracking the “source of wealth”. You don’t pitch up one day with two bags of cash to buy a Ferrari without questions being asked. Anyone living obviously beyond their means (spending more than they earn) is going to be suspicious. Unless they have a good explanation, and evidence. Rich generous parents or something other than the traditional “get a job” or “start a job”. Building capital requires a source. Bradley Shearer founded Protagion - Active Career Management in an analogous way to Fundamental Stock Pickers. The source of wealth is often very traditional. A job. A job comes with choices. Investing in continuous education. Identifying roles you want. Building the skills for them. Converting your skills into capital to support that. Protagion is hosting a virtual conference (#ProWeek) to explore some of the ideas. I will be participating in both an open panel on “financial independence and diversifying income”, and a smaller group discussion for subscribers focusing on my ideas around Financial Yoga.

 

I See You

Fundamental Investing is the “Sawubona” of investment philosophies. “I see you” is the aim. What you see is not all there is. A business is not just about an idea. It is about what gets done over a significant helping of time. Meritocracy is caveated by the ideas of competitive advantage and barriers to entry. Any idea, whatever its quality, requires Capital to protect it from the waves of chaos, and to feed its growth. Any idea, whatever its quality, exists in an ecosystem of stakeholders (regulators, suppliers, customers, competitors, employees, investors) that force its existence into constant existential evaluation. Resources are limited. We don’t get to do everything. There are tradeoffs. Fundamental Investing is about seeing the potential through the noise of the conspicuous. It is about looking at support structures. It is about doing due diligence on how something exists, not just that it exists.

compound eye of an antartic krill