Surviving the Storm

The Agency Problem is the conflict of interest that exists when one party is expected to act on behalf of someone else. In investing, you can try aligning interests, but the reality is you cannot put everyone in the same boat. Even if it is the same storm. If someone is rewarded for performance (deservedly or luckily), there is a butterfly effect. Money is in part made through merit, but also made through capital and containers. As you build capital, you have capacity to have a longer time horizon. You no longer live hand-to-mouth. You can say “No” more often. As you build capital, you can create barriers to entry to protect your “merit”. The key competitive advantage in investing is not the skill of investing. It is the club that has been built. The container used to gather investments of others. The vehicle that gives certain people the privilege to invest other people’s capital. Even when they are not performing. The club buys time for the storm to pass… for the agent.

Survive the Storm

Cornerstone Events

Autonomy and Consent are core values of mine. I believe we all have Cornerstone Events that colour the way we view the world. I was born in Apartheid South Africa. I was 14 when it ended. At the same time, my parents (and those of many in my school class) got divorced. My work life didn’t progress on the path I wanted it to, till I made a stab at self-determination. For the last four years, my wife and I have been going through Fertility Treatment. I had two surgeries to confirm that I have no soldiers. We had three unsuccessful IVF treatments with donor sperm. Huge existential questions about kids, no kids, adoption, risks, money, success, expectations. The degree of Righteous Indignation and Saviour Complexes I carry with me stems from these Cornerstones. How do you get to the point where you feel you are living life rather than life living you? Part of Autonomy and Consent has to be Acceptance and Surrender. Some things just are. No reason. No sense to be made. Then tweaked. So that every day carries some agency. Building on the day before. Building towards the next morning. Making meaning.

Foundation Building

We don’t have to live hand-to-mouth. Capital can earn money that can finance our needs, and in good times wants. It can provide a buffer for the knocks. Then how we spend our time ceases to be filtered through the question “how can this make money?”. We can free ourselves from a pass-the-parcel economy where a break in the chain causes us to all fall down. We can afford to do care work that doesn’t pay. A challenge with this is “Agency Risk”. There has to be trust and alignment of interest if the managers are not the owners. A lot of risk management focuses on performance. What you can see. What you can see isn’t all there is. Risk control is holistic. If managers get rewarded in good times, but feel no pain in bad, interests aren’t aligned. If (some of the) managers co-invest (for show) but have substantial other assets and safety nets, interests aren’t aligned. The advantage of scale is that standard solutions can spread, and be provided by fewer people. The disadvantage is that things become abstract, confusing, and distant. Without a solid, explicitly-aligned, universal foundation, trust is bound to be superficial and dependent on a fragile illusion being maintained.

Foundation Building

Developing Autonomy

The team at GMB Fitness talk of developing Physical Autonomy through working on strength, flexibility and control. Watching them move so gracefully makes it appear as if the laws of physics apply differently to them. I started Yoga 11 years ago, yet I still have aches and pains which constrain me. I declared Financial Independence 5 years ago, yet I still have costs and pressures which constrain me. The analogies between how we engage with the world physically and financially resonate strongly. Finances aren’t about what you do, they are about how you do it. They are about movement. I love the idea of more people moving through the world with autonomy, agency, and consent. Feeling empowered to make choices. Moving with mastery. It isn’t about having the Financial Freedom to opt-out. It is about releasing the way we engage with the world from the constraints of unnecessary niggles. Then engaging with the pulse, the beat, and the flow of meaning creation.

GMB Fitness - Strength, Flexibility, Control