Magic Time

Most things worth doing are hard. Wealth creation is no exception. It often feels unfair, painfully slow, and full of noise. When you hear about people who seem to have made it quickly, it looks magical. But the truth is, what feels like magic is usually time, discipline, and persistence working quietly in the background.

The challenge is that most of us don’t notice when the magic is happening. Wealth whispers. Outliers shout. We see the flashy stories of quick wins, not the quiet stories of compounding. And when you’re just starting out, especially in South Africa where inequality is visceral, the distance between where you are and where you want to be can feel overwhelming.

The Myth of 15-5-50

I once gave the “50-15-5” idea a real crack. The theory is simple:

• Save 50% of your income

• Do it for 15 years

• Invest it to earn 5% above inflation

The promise? Financial freedom in less than two decades.

But each of those numbers hides brutal realities.

• 15 years is a very short runway. Most people work 30, 40, even 50 years and still struggle to retire comfortably. To do it in 15, you either need very high earnings or very low expenses. That’s not most people.

• 5% above inflation sounds modest, but it’s aggressive. Equity markets can deliver it, but not consistently. You’ll get flat years, sometimes negative years. Over the long haul, the averages hold up. Over 15 years, luck and timing matter more.

• 50% savings is perhaps the hardest of all. It’s possible if you’re single, with no dependents, but once you add a family, extended family, or community obligations, the maths gets tougher.

The point isn’t that 50-15-5 is impossible. It’s aspirational. It’s a reminder that compounding can create magic if you’re in the game long enough. But it’s not the only path, and trying to sprint can burn you out.

Context Matters

In South Africa, this conversation is layered with complexity. Ours is the most unequal country in the world by Gini coefficient. Unemployment rates are comparable to the Great Depression, but structural. A small tax base supports a large population. Many households are living hand-to-mouth.

At the same time, we benchmark ourselves against wealthier countries. Through sport, social media, and global culture, we’re connected to lifestyles that feel impossibly distant. It’s like being pulled in two directions: face-to-face with poverty at home, while aspiring to compete on a global stage.

In that environment, dreaming about wealth can feel tone-deaf. You’re torn between wanting to lift others up and needing to secure your own future. But here’s the truth: if you never make space to build capital, you remain stuck. South Africa will only thrive if enough individuals build stability, buffers, and engines that free them to contribute more. As Rassie Erasmus once said: “Stop talking k* about South Africa. Make a plan.”

Noise, Neighbours, and False Control

One of the hardest parts of investing is separating what’s in your control from what isn’t.

People think investing is about picking the right stock. Timing the market. Outthinking the crowd. But that’s mostly noise. Returns are influenced by randomness, variance, and luck. Even bad decisions can look smart for a while. Neighbours who take reckless risks can seem like geniuses until the tide turns.

Here’s what you can control:

• How much you spend

• How much you save and invest

• The skills you build and the work you do

• Your exposure to risk (asset allocation, diversification)

• Staying in the game — not blowing yourself up with debt or speculation

And here’s what you can’t:

• Market returns in the short term

• When volatility arrives

• What your neighbours are bragging about

Salary feels safe because it’s smooth and predictable. Investing feels discouraging because it’s noisy and volatile. The trick is building a separate mental model. Money invested is not a salary. It grows unevenly, sometimes invisibly, but it grows.

Stillness helps. If you treat setbacks as random, not personal, you avoid the trap of thinking the world is judging you. Bad things happen. Good things happen. Your job is to be resilient enough to handle the bad and ready enough to capture the good.

The Roadmap to Magic Time

So what does the path actually look like? It’s not one magic formula, but a series of milestones that are worth celebrating along the way.

Stage 1: Net Worth Day (Debt Freedom)
The first big milestone is when Assets – Liabilities = Positive. That’s huge. Getting out of bad debt is step one. Use debt counsellors if needed. Swap credit cards for debit cards. Stop spending money you don’t have.

Stage 2: The Shock Absorber (Buffer)
Save 3–6 months’ worth of expenses. This is your financial shock absorber. At the same time, if you have dependents, get risk cover — life, disability, income protection. It’s a grudge purchase, but it buys peace of mind.

Stage 3: Micro-Wins (Early Capital Building)
Celebrate when your invested capital equals one year of your salary. At that point, your money is starting to “get a job,” even if you’re still the bigger engine.

Stage 4: The Magic Number (Capital x25)
The long-term aspiration is capital worth 20–50x your annual spending. At a 4% withdrawal rate, that makes you financially independent. 2.5% is a more aspirational number, because then you aren't harassing your capital and it can still grow even though it is supporting you. Either way, that’s the freedom point.

Stage 5: The Compounding Kick
The hard work is in the scrum up front. Early progress feels painfully slow. But once your money earns as much as you do, the flywheel spins faster. That’s when the magic feels real, but by then, it’s no longer magic. It’s compounding.

Wealth Whispers

The danger is thinking this happens fast. It doesn’t. The loudest stories are often the outliers: the person who “retired” at 35, the neighbour who doubled their money overnight. But most of those stories don’t end well. When things fall apart, the shouting stops.

The stories worth emulating are quiet. The teacher who invested diligently. The janitor who left millions to charity. The client who worked with an advisor for decades and quietly compounded. These are the ones that don’t make headlines, but they’re real. Wealth whispers.

Actionable Steps

The punchline is simple: get your money a job.

For most people, that means getting help. A good financial planner isn’t just a salesperson. They’re more like a therapist: someone who listens, learns your context, and helps you navigate trade-offs. Your job, your income stability, your dependents, your goals — these all shape the plan.

Here’s where to start:

1. Get out of debt. Celebrate Net Worth Day.

2. Build a buffer. 3–6 months’ expenses.

3. Buy peace of mind. Risk cover: life, disability, income.

4. Find a planner. Someone who can listen and partner with you.

5. Start investing. Pension funds, employer schemes, and your own investments.

6. Adapt as you grow. Individual → family → community.

It’s not about doing everything perfectly. It’s about chipping away, building slowly, and giving time the space to work.

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Conclusion

Magic time isn’t about quick wins or outlier stories. It’s about patience, buffers, and engines. It’s about celebrating small milestones while ignoring the noise. It’s about getting your money a job, and then letting time do what looks magical, but is actually just compounding doing its quiet work.

Wealth whispers. And that’s fine.

Capital and Labour

My first salary felt amazing. After years of being a student, suddenly there was real money in my account. It was more than my mother earned as a teacher after decades of work. That was humbling. It made me realise how strange it is that we often define ourselves by our salaries, when in truth, a salary is just the price of labour.

And price is not the same as value.

Price is set by supply and demand. It does not reflect whether the work you do is good, meaningful, or changes the world. It is just a market signal.

I had studied actuarial science, a pragmatic choice. Early on, I went to see a financial planner. Partly I wanted to test the process, since I was working in risk product development and thought I could probably do it myself. But I also wanted to see how someone else would frame my situation.

The thing that hit me hardest was this: I was the asset.

My income depended entirely on my ability to keep working. If something happened to me, the income stopped. Even scarier than thinking about life cover was the thought of being alive but unable to earn, still here, still needing money, but with the engine broken. 

At that stage, I had no dependants. But the idea that other people could rely on my salary, when I had no buffer and no engine outside of myself, was unsettling. That was the moment I understood the difference between capital and labour. Labour ends when you stop working. Capital keeps going. Without capital, you are the engine, and that is a fragile place to be.

The Hard Scrums of Inequality

South Africa is rugby-mad, and I often think about wealth like a scrum. The forwards decide whether you win the match. The backline only determines by how much. In the same way, building wealth is not about flashy tries or quick wins. It is about grinding, unseen work that sets the platform.

First-generation wealth creation is brutally hard. Many South Africans live hand-to-mouth. For them, “delayed gratification” is not about giving up luxuries, it is about giving up survival comforts. In that context, talk of Buffers and Engines can sound tone-deaf.

But if we never acknowledge this and never try to break the cycle, we remain trapped. Poverty compounds just as surely as wealth does. That is why I think of wealth-building as the work of a half-hearted warrior. You do not need to storm every hill at once. You just need to create a little bit of space, enough to start building.

For me, the Buffer is that first space. It is the small emergency fund that shields you from life’s daily chaos. It does not make you rich, but it creates silence in the noise. The Engine is the goal. It is the asset that generates income separate from your own labour. Building an Engine from nothing is slow and often discouraging, but unless we aim for it, we will never get there.

Buffer vs Engine

A Buffer is your shock absorber.

Life does not move in a straight line. Some months you spend more than you earn, other months less. Without a Buffer, those bumps knock you off track. With one, you can keep rolling.

That is why people talk about an emergency fund of three to six months’ expenses. It is not glamorous money. It pays for replacing a tyre, fixing a broken window, covering a surprise tax bill, or helping a friend in need. A Buffer does not make you wealthy. It just means one bad month does not break you.

An Engine is different. Where a Buffer absorbs shocks, an Engine provides momentum.

Engines generate income separate from your labour. They are the assets that pay you while you sleep: a rental room, dividends from a fund, royalties from creative work. For many people, the “Bank of Mom and Dad” plays this role for a while, helping with fees, housing, or start-up costs. But a true Engine is independent. It keeps paying pocket money even after childhood is long past.

The ultimate Engine would be something systemic, like a Universal Basic Income or Community Wealth Fund that guarantees a baseline for everyone. That is when you know your basics are covered, no matter what goes wrong.

A Buffer gives you confidence that you can survive the bumps.

An Engine gives you confidence that you can build a future.

The Structural Fixes

Of course, the obvious counterargument is that not everyone can save.

And that is true. Especially in South Africa, where a small tax base carries enormous weight, and millions live hand-to-mouth. Talking about Buffers and Engines can feel tone-deaf against that backdrop.

That is why structural fixes matter.

We already have elements of support, like social grants. But grants are means-tested, which is expensive in itself. The irony is that deciding who qualifies costs money. That is the elegance of Universal Basic Income. It skips the gatekeeping. Everyone gets it. Those who do not need it simply pay it back through tax. It appeals to the left because it guarantees support, and it appeals to the right because it shrinks the state’s role in micromanaging people’s lives.

The real question is: can South Africa afford it? My answer is that we cannot afford not to think about it. Affording it means wasting less, fixing potholes, keeping the lights on, building competent administration. I like the way my friend Gareth Morgan puts it: good governance is about being good at crises. We need less politics as theatre, and more politics as administration.

South Africa already has a culture of “making a plan.” We improvise. We hustle. We survive. But we also need to create space for families to build steadily, and for communities to compound progress rather than constantly reset.

Yes, inequality here is in your face. Our Gini coefficient is the worst in the world, but it is also the same as the world’s overall Gini. The difference is that here you cannot pretend it away. It is on the streets, in your neighbourhoods, part of daily life. And maybe that is an advantage. It forces the conversation.

If we can combine the resilience of individuals with the competence of institutions, then Buffers and Engines do not just become a personal dream. They become the architecture for a society where wealth is not inherited by a lucky few, but built by many.

Call to Action: Get Your Money a Job

At the end of the day, the mantra is simple: get your money a job.

But before money can work for you, you often need to stop it working against you. That is why I think of First Aid as the starting point (First Aid). Get out of debt. Stop the bleeding. That may mean hard choices, painful trade-offs, and resetting priorities. It means writing down what matters most and breaking it into small, achievable steps.

From there, it is about micro ambition (Micro Ambition). Tiny goals that add up. It does not sound glamorous, but that is the magic of compounding: small efforts, repeated, snowball into something powerful. Money makes money. That is how the system works.

So the path looks something like this:

1. Stop the bleeding by dealing with debt.
2. Secure income, since your salary is the origin of wealth. Labour is the first Ox in the scrum. It takes sweat and red faces to push forward.
3. Build a Buffer as your shock absorber against life’s bumps.
4. Feed the Engine so assets can work even when you do not.
5. Compound micro ambitions into long-term freedom.

The hard truth is that first-generation wealth creation is invisible. Compounding works in three stages. First nothing seems to happen, then progress appears slowly, and finally it becomes undeniable. The heavy lifting is always at the start.

You can fight money, resent it, or ignore it. But that only leaves you at its mercy. The better option is to learn how it works and put it to work for you. Get your money a job

pic: SA Rugby Mag

Next Generation

The tragic thing about compound interest or capital compounding is that most people won't actually get to experience it. Even those of us who are good at delaying gratification (saving before we spend, rather than spending before we repay our loans) are still...

...saving or investing with the intent to spend.

Compounding only truly kicks in when you've got a lot of money, and when you're not constantly drawing from it.

Think in really simple terms: half a million Rand, 10% of that is R50,000; a million Rand, 10% of that is R100,000. It's *the same 10%*, the same merit, the same skill, the same performance—but it's twice as much money.

Why? Because you started with twice as much.

In reality, at the beginning, most of us have hardly anything to invest, so it's barely growing. Later, when we actually have money, we're often spending it, so we're continuously interrupting our capital's growth.

Very few people reach that point of soaring, where you're spending so little of your capital that it can compound properly.

That's when the magic kicks in.

Maybe the real answer is planting trees for the next generation.

Reliable and Sustainable

There is often a disturbing amount of truth in oversimplifications. One is that the path to wealth is shopkeeper-professional-entrepreneur-bust and repeat in four generations. 

To start building wealth you need to first find breathing space between what you are earning and what you spend. You need to snap the hand-to-mouth connection. Gradually you build capacity to think about risk differently as you have more faith in your own grounding. When you have sufficient capital for a deep sense of knowledge that you are going to fundamentally be okay. 

Then you can build that base up to be an engine. An engine earns more on average than you spend on average. At that point, particularly if the engine is earning comfortably more than you spend, it starts growing. Compounding kicks in. Growth on growth. Even without you earning. Then it is no longer just about you, your earning capacity, and your consumption. Decisions extend beyond you and even your lifetime. Impact scales. Work is no longer about financing your needs. 

If you have sufficient capital, it can become a muse. Not all ideas are good business ideas. If you have the capital, they don’t need to be. Good ideas, that are not good business ideas, can be funded by good ideas that are good business ideas. Good businesses reliably and sustainably generate a growing stream of cash.

Hesiod and the Muse

Spending and Earning

Sustainability is the key to compounding. Although what you do matters, what you are doing now matters less if you can’t carry on doing it. 

An engine is capital that earns (on average) more than you spend (on average). As soon as that balance of consumption and creativity changes, the clock starts ticking. 

If money can sustainably make money, and we can spend less than the money sustainably makes... there is no reason that can’t carry on forever. If the sustainability is cared for. 

For money to make money, you need to ask very pragmatic questions. 

How is money made? What is wanted? Where is the scarcity? What are the skills and knowledge needed for those specific requirements? Are too many people already working on those problems? How are decisions made? What are the containers those decisions are being made in? What are the barriers to entry? What are the barriers to exit? What frameworks of understanding and action are we using? How are we communicating? What agreements do we have? 

You can only be freed from the constraints of these questions if you have control of the balance between money coming in, and money going out.

hanging from the see saw

Connected Energy

Real understanding of what is permanent, and what really matters, is the step you need to go through for true liberation. For the ability to engage effortlessly. 

You can still be doing amazing things, but without the weight of anxiety that sits on you. You build a practice that gets you to that stage over the long term. It takes commitment. A commitment that connects what you do every day. Small goals that add up. 

The productivity that matters is the *compounding* of a productive asset. The real driver is not simply being noisily creative, but whether that creativity is connected. Reinvesting rather than consuming energy and life. 

Where the outcome of what we do is not just something we have now. Where we become custodians, with constant growth through the pulsing cycle of life. 

We can come back into “the system” rather than simply raging against it. Adapting, adjusting, accomodating. Starting from where you are. Connecting to where others are. Compounding rather than consuming. 

Where what you do is not just about you and hand-to-mouth survival. Where what you do is driven by real understanding of why you are doing it.

Where does your energy go?

Soaking Deep

We don’t necessarily have to understand our engagement with the world. Yoga talks of three states of consciousness. The three semi-circles you see in the Om symbol. 

The knowledge that is going on in our heads. The embodied knowledge that has soaked so deep, that it is part of our behaviours and habits (which we may or may not even be aware of). The free-flowing knowledge that is in our dream state... our state of processing and connecting and imagining. Our hallucinating walk around the way we experience the world. Where symbols and moments blur. 

Revealed preference is when the combination of our three states leads us to act in a way that may be different from what we say we want. You might say you like little local coffee shops that are different. Then buy your fix at Starbucks. You might say you like independent bookstores. Then buy your books online. 

As creatures, our behaviours are not always consistent with what we say we want. This opens us to manipulation if the way things are framed can change our decisions. The same information with a different story can lead us down a different path. This raises the importance of being able to pause, step back, and reflect on the choices we are making. 

Actions have consequences. Consequences compound. Connecting to each other and soaking deep into future options.

Om Symbol

Linked Moments

Fundamental investing and a focus on value creation are concerned with long-term compounding. How moments are linked to each other. Sustainable actions with intentional consequences. 

Price exists here and now. It moves in rapid response to supply and demand. A higher price attracts more people and resources to meet that demand. A higher price makes people who want that problem solved consider alternatives. Our decisions are all relative. 

We have a limited basket to fill, and very different decisions to make. Price averages out our immediate decision making. We do not all pay what something is worth to us. We pay the same. Some get a good deal. Some think it is fair. Some will feel they need to explore options, or uncomfortable but still pay. Others will walk away. 

That process communicates information about where resources “need” to go. A surface level information flow that does not have knowledge of all the behind-the-scenes complexity. Adam Smith’s invisible hand pulling on our tacit knowledge. The stuff we understand, or don’t understand, about our own worlds. That gets expressed through how we engage and what decisions we make. Revealed preference.

How are things connected?

Solution or Problem

The magic of fundamental investing is reinvestment and compounding. Where what is being produced has the space and time to reproduce. It is not about consumption. It is not about predicting the future. It is not about relative performance. 

It is about doing work. Solving problems. Allocating capital to good business ideas. Ideas that meet, and excel within, specific constraints of numbers-based endurance, resilience, and creativity... generating enough to support a different form of values-based endurance, resilience, and creativity. Financing good ideas that would otherwise get mangled when forced through the filters needed to fit money-making boxes. 

Property could be a productive asset in the sense that you get rent from it and then invest that in something else. Residential property doesn’t sit well with me as an investment in that sense, because “affordable housing” is a problem we want to solve. Housing as an investment, and housing as an expense, are in direct competition. 

We want spending problems to go away. We want investments to grow. We all sleep for eight(ish) hours (ideally). In one bed. It doesn’t matter how many rooms you have or how rich you are, when you close your eyes (if you are safe and warm). Is the goal for the same house to rise in price? It is important for us to ask ourselves if we are even trying to solve the problems we know we have. 

Or would a solution be a problem?

Tutankhamun's Gilded Bed

Uncommonly Connected and Compounding

Goals are not picking the best of every possibility in isolation. That is dreaming. You can close your eyes and visit various places instantaneously. You can explore parallel universes where you made different decisions, and outcomes were completely of your choosing. When you open your eyes, you must go from where you are. 

The more realistic goals are tiny. Small nudges from where you are. Shane Parrish suggests, “Ninety percent of success can be boiled down to consistently doing the obvious thing for an uncommonly long period of time without convincing yourself that you are smarter than you are.” 

You can build scripts, and behaviours, and habits, and flexible plans. You can be micro-ambitious with tiny goals that add up. Goals that are connected and compounding. 

Behavioural Finance looks at the idea of biases. Embodied shortcuts that help (or hinder) us in our decision-making. We don’t (and can’t) have full information, but must act anyway. Understanding your biases can help you tweak your micro-goals. Understanding your biases can help you see what you do for uncommonly long periods of time, rather than getting obsessed over things that come and go, and cancel out.

Give it Time

Doubling Time

Part of the story I tell myself about money comes from the micro-world I grew up in. The bubble within a bubble where my parents were the decision makers. One of the ways I was taught saving was that my parents used to match what I saved. How do you instill the concept of compound interest, and delaying getting something now, so that it can build for later? Saving and Investing are worth thinking of as different things. You save *for* something. Investing puts money to work (reinvesting rather than consumption). You can then spend some of what the investment earns, and reinvest some. But it is hard enough learning delayed gratification by saving, so... baby steps. Compound interest also takes time to kick in. 5% real return would double your money in roughly “rule of 70” 14 years (70 divided by return equals roughly the doubling time). No kid is still a kid if they have to wait that long. The big thing I wanted was a music system. I saved half by starting a sweet business, and my Mom matched what I saved. Where she got the magic “compound interest”, I don’t know. But she managed. She was a bit of a hero.

Funny Faces sold individually were my biggest winner

Long Term

Although investing is a long-term game, our working careers are short. 5 years is not a long time. Even 15 years is only just long enough for compounding to start hinting at its magic. In “The Psychology of Money”, Morgan Housel points out that Warren Buffetts' biggest weapon was that he started investing at age 10, and has kept at it without quitting for 80 years and counting. At the time of writing the book, Buffett’s net worth was $84.5 Billion, of which $81.5 Billion had been made since his 65th birthday. Housel’s rough estimate of the size of Buffett’s Engine if he had started at 30 (after enjoying his 20s/setting up home), and stopped at 60 to golf, is $11.9 million. That is a big Engine. But no one would know who he is. 80 years is the number that really matters... and all the small numbers that contributed to the foundation years are the only reason the glory years exist. Merit applied to nothing doesn’t get seen. Conspicuous Merit always builds on deep history. 

Time measured in Ice Ages

 

Reds in a Row

“The Gambler’s Fallacy” is the erroneous belief that an event that has no memory is more likely to happen because it has not happened, or vice versa. 

Like thinking the next spin of a Roulette table is likely to be Black because it has been Red 8 times in a row. It is still (just less than) 50% (because of the Casino’s edge). Every spin has the same probabilities. The past does not matter. 

In the world of money and merit, we make the opposite mistake. Besides skills and knowledge, other things matter. Capital and Containers. If you have good luck, and build capital and barriers to entry, your odds do change. Your capacity to handle ups and downs. Your opportunity set. 8 Reds in a row, even through good fortune, inheritance, the lottery of birth, prejudice, or a chance connection, will completely change the game. 

If you capitalise your luck rather than consuming it. If you release your misfortune, rather than compounding it. If you consciously choose the events to connect.

A Little Extra

How did you do pocket money?

I got pocket money based on age, with increases each birthday. And when I was eight, I got a R8, and when I was nine, I got R9. That was how it worked till inflation kicked in, and then fortunately my parents changed the rule. That gave me an impression of progress. Of ageing, seniority, hierarchy, and annual increases. Older siblings got more (I am not bitter).

My parents would match our savings. If we saved up for something, they would contribute to whatever it was that I was aiming to buy. It is hard to teach compound interest to kids because the time horizons are so short. Compound interest takes a very long period of time. To teach that concept, you need to come up with some sort of game that can amplify the idea that money makes money. That money can have a productive job. That money can grow if you give it time.

Lots of people did not get pocket money. Just like Father Christmas does not give all children presents of equal value. Pocket Money can be a foreign concept. The idea that there would be extra. Many parents are struggling just to survive.

That is going to affect how you see the world.

The Awakening of Father Christmas

Punch, 1891

False Gods

Money makes money. This allows wealth to compound (the growth also produces), if not everything that is produced is consumed. If some of the fruit is planted, and given the space to grow. This is both powerful and dangerous. Ideally, you want to fail hard and memorably early on, to knock the delusions of grandeur out of you. You do not want to be that false god who complains that the (clean and comfortable) guest room is not up to the standards to which they are accustomed. Because if you do not regularly suffer some misfortune, chances are life will one day smack you hard and repeatedly in the face. Probably when you are managing other peoples’ money. As Mike Tyson said, “Everyone has a plan until they get punched in the mouth”. You cannot just judge yourself on how your path has played out. You cannot judge others without looking in a mirror and reflecting on your potential unwalked paths. We are communal animals, and every path is an alternative reality. One you could have easily been on. The key is not profit making and ego building. It is reinvestment, and building buffers and capacity for whatever punches are thrown.

Nergal Gate in Ninevah

Given Time

I am not that interested in the first five years, if that is all that is on offer. I believe in compounding and foundation building. If you are living hand-to-mouth, neither of those factors are relevant. If you are simply being paid for the work you do, and that gets consumed. Money is made in containers. If you help build a container, you want to have a stake in that container. Ownership. The kind that exists beyond you. Real wealth is created over the long term. Through owning the container. Through owning the barriers to entry. Even fifteen years is short. Compounding is just starting to kick in. We judge ourselves over short periods like months, quarters, and years. What is your 100-year plan? What is your 1,000-year plan? What is your plan that has nothing to do with you?

The Cango Caves

Surviving the Stages

Few businesses plan to die (although most new businesses do). In that way, legal people (a company has legal rights and is subject to obligations) have the ultimate advantage over real people. Given that the most powerful investment tool is time, even modest real returns will compound into the gargantuan with a long enough time frame. The key is survival, even if the nature of the business changes dramatically. Nokia was founded as a pulp mill. Berkshire Hathaway (Warren Buffett’s Engine) started as a textile factory. Wells Fargo, the bank, started life along with American Express carrying deliveries in Stage Coaches. The two key elements besides what they do, that most real people tend not to think about, that are essential for the survival of legal people are (1) Capital, and (2) The Container. A good business is not a good business if it can’t survive. It doesn’t matter how good the idea, if it can’t pay its bills when they come due, or survive periods of disruption and destruction. If you want to build wealth, the key ingredient is capacity for time.

1879 Wells Fargo Stagecoach

Giving Time

Building things of value takes time. There is no magic wand to wave to solve financial problems without a massive stroke of luck. Great practical examples of building solutions over time are the Superannuation Funds in Australia. Introduced in 1992 with an employer contribution rate at 3% and employee contribution rate at 1%, the percentage gradually rose. It was initially met with resistance. You can appear like a kill joy if you promote delayed gratification. If you promote living dramatically within your means. If you learn how to live on less, from those with less. Rather than learning how to feel bad about yourself, by looking at those with more. Financial Security is a team sport, and somehow you need to disconnect comparison with those who are not on the same team. Building Capital means developing internalised discipline not to spend money that appears to be there. It’s not “there”. It’s working. Allowing Capital time to work and grow unmolested is the path to financial security.

Financial Security takes Time to Build

Fighting over Scraps

The Corporate world is a game, best played as a game. I wasn’t good at it because I wasn’t willing to accept the veil of meritocracy. I took it too seriously and literally. I was too deep soaked in Righteous Indignation. It is more a club with increasing levels of loyalty when you prove yourself. Layer 1 is for cogs. Paid a salary and with a notice period. Your salary is the price it would cost to replace your skills and knowledge. Layer 2 is longer term incentives. Tying you in so breaking loyalty will cost you. Layer 3 is participation in profits (and losses). The club aims to reward you enough to stay, but not enough that you can afford to leave. Layer 4 is ownership. That private club isn’t open to everyone. Wealth creation gets institutionalised, so the first three layers are sufficient to create the value while closing the door to layer 4. Layer 4 is for immortality beyond individual contribution. Enough underconfident overachievers will do the work in the first three layers to make sure layer 4 is exclusive. Harsh reality? Layer 4 is available to those who start from scratch. The first three layers are attractive enough that people will fight over the scraps. Institutions change unwillingly. Pick your layer 4 and build new institutions.

Buying a Slice

Passive Investing involves fewer buying and selling decisions, and often results in an investor buying an index fund. The theory of passive investing suggests an efficient market. This means all available, relevant, information is included in the price. There is therefore no way to “beat” the index’s performance (other than by chance) because there is no mismatch between value and price (no bargains on offer). An index is a “basket of everything”. Except there is no market for “everything you can buy”, and there is no index tracking “a slice of everything”. You still need to actively choose an index, then take a view on that market’s efficiency. Fewer decisions lowers the costs. I agree. But my approach is more “Wu Wei”. Action through inaction. Make as few decisions as possible, but don’t buy something just because it is there. I believe in Fundamental Investing. Not buying something just because it is a bargain. Buying a slice of a real business because I understand what it does. I have a sense of its sustainability (because compounding matters). A sense of its resilience (because the world is unpredictable). Investment is about solving real problems in the real world. Consistently and creatively getting stuff done.