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.
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
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