Support Structure

The original Marshmallow experiment looked at whether you could predict future success based on the ability to wait for a sugary treat. The skill of delayed gratification. More recently, a study controlled for socio-economic factors like parent’s education and early childhood development support. Once that was taken into account, waiting for the marshmallow had almost no predictive power about future success in school or life. Waiting is a core part of wealth creation. I do believe it is something you can learn. Something you can build into your habits. Spending has rhythm. Daily, weekly, monthly, yearly. You can pay attention to the things you consume regularly. You can pay attention to unsurprising surprises you can plan for, so they don’t regularly force you to start from scratch. Then, if you have fundamental faith in the future, and your place in it... you can allow the space and time for reinvestment. Where wealth isn’t what you consume or display. Wealth is the systemic structure that supports creativity.

Gothic Quadripartite Cross-Ribbed Vaults

 

Hereditary Entitlement

Meritocracy came in as a response to hereditary wealth. Hereditary entitlement. You had a position or role in your caste or class, and that came from your parents or the money you inherited. Meritocracy was the wild idea that you should hire the best person for the job. Which is the most skillful or the most knowledgeable. You should push resources to where they will have the biggest impact. That provides a path for social mobility, and it allows people to move “up”. If you use that directionality. The problem with meritocracy is that the idea is handicapped by the impact of privilege. Part of our incentives is money, but part of it is we naturally want to invest in the skills and knowledge of our children. We quite reasonably want to give them a competitive advantage. One of the barriers to entry is education. If you give someone education, you implicitly strengthen their barriers and that compounds. So there is a lot of thinking to do about conspicuous meritocracy and the barriers that people have to overcome. If we really want to get resources to where the true merit is. 

Focussed on Up

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.

A job application dated 1913

Into the Jungle

I spent two years between school and university on a work-travel visa in the UK. I did not know what work I wanted to do, and my older brothers were both at university studying medicine. They talked me out of following their path. I waited tables till I had the money for a plane ticket, then got a job as an assistant teacher at a prep school. That gave me time to plot. I initially considered teaching and architecture, but the teachers I knew complained about how little they got paid, and the architects said they did not do creative work. What drove my final choice was an acceptance that STEM skills get paid more. My maths teacher had mentioned Actuaries, but most people (including some who choose to study Actuarial Science) do not even know what they are. The kicker was there were bursaries available. Not a sexy career choice, but on the menu. The hardest part is finding out what reliably needs doing, then putting in the effort of building those skills. Look at job adverts. Look at career paths on LinkedIn. Speak to people one step ahead of you on a path open to you. Then, good luck. It is a jungle out there and we do not all have the same tools and choices.

Defending Problems

In well-functioning markets, things get cheaper. This is a key reason you should not define your worth by your salary. Your salary is the price of your labour, it is not your worth. No one, anywhere, gets paid what they are worth. In markets that are clearly broken like education, health, law, and housing, prices do not go down for the honest reason that we do not really want them to. A high price can also be the product. Like the record prices paid for paintings. The product is the signal of what the buyer can afford. If we want affordable housing, you do not need to be Elon Musk to figure it out. Build more houses. We misname skilled and unskilled labour. It is not about the level of skill. It is about the supply of people who can solve the problem. Spread the skill and the price comes down. The second level problem with problem-solving, is what do you solve next? What do we do with our time and sense of self if the problem we solve gets solved permanently? We live in a world where we need problems to eat, and have a firm handshake. We manufacture problems and defend the walls around the containers we solve them in.

"Salvator Mundi" by Leonardo da Vinci

Most expensive painting sold in 2019

$450 million

Panning for Gold

My oldest brother used to love (as a Medical Student) asking, “What do you call a Medical Student who gets 50% for their final exam?”. The answer is Doctor. It is only in the classroom setting where the false laboratory conditions allow us to weigh and measure everybody. You can even ask university level questions for 2 marks to separate the first and second place 12-year olds who are getting everything “at their level” right. In the real world, meritocracy is limited by the fact that no one cares how clever you are. It is not about you. They want their problem solved. If there is an over supply of problem solvers, you do not have to pay them very much. As more people can read, write, think, create, and exchange ideas, it gets harder to pretend the barrier to wealth is merit. The barriers are not skills and knowledge. The barriers are the containers. Rather than survival of the fittest, it is survival of the most flexible. What is the container in which you make money? Why can’t others make money in that way? What if that container no longer existed?

Basic Questions

It is true that the world is always changing. But it is not changing so fast that you don’t get a lot of information by asking simple questions like

(1)    What skills and knowledge does doing your job involve?

(2)    Where did you develop those skills and acquire that knowledge?

(3)    What are the entrance requirements?

(4)    What would the obstacles be to me being trained?

(5)    Do you enjoy your job?

(6)    Are you financially secure?

(7)    Any questions you wish you had asked before embarking on your path?

You have to assume that there will be significant obstacles to any path that is well remunerated. Either that, or the job itself is not very pleasant. There has to be some reason why the supply of people willing and able to do that job doesn’t exceed the demand. There are 7.8 Billion people on the planet, half of those people earn less than $3,000 (Gallup 2013), and we are consuming more than the planet can handle. Part of designing your path to financial freedom is accepting some hard truths, and making some difficult choices. About your goals. About your values. About your willingness to do what it takes.

Prepare

Outsourcing Discipline

Some of the best investors I know don’t believe you need financial advisors or asset managers. Unfortunately, “you don’t need me” isn’t a good business idea even if it is true. There are no Gods of investing and there are no real secrets left. If you want to build wealth, there is more than enough information out there to self-educate. Teaching is an underpaid profession partly because it genuinely solves the problem. It empowers people to be self-sufficient. Good business ideas require the person to be an ongoing part of the problem solving. To create a Pantheon of chosen ones for mortals to put their faith in. Content creation also struggles (thanks social media) because there are plenty of people willing to share Zeitgeist ideas and knowledge for free. Even if you are just sipping on the collective tasters. Money is made in containers. That is what Asset Managers charge for. The Illusion. The protection. The due diligence of the machine that backs the process. The Custodians, Lawyers, Auditors, Compliance Officers, Administrators that turn a simple process into the shining land of Oz. That, you can’t do yourself. Obviously, there is a difference between being able to do something, and actually doing it. Consistently. That is what you are paying for. Paying to outsource your saving discipline.

Wealth is built in Containers

Position in Space

A Competitive Advantage is the reason why one Container (business/nation/community/family) is able to produce goods or services better or more cheaply than other Containers. Having a product/solution isn’t good enough to make money when there are 7.5 billion people on the planet. There has to be another reason people choose a specific Container over another. There have to be barriers to entry and barriers to exit. Skills and Knowledge are one form of Competitive Advantage because they take time, money, and acceptance to develop. You have to be able to afford to not be earning while you commit time to reskilling. Until (and it is happening) Education gets properly disrupted, you either need Mom & Dad or a rich Government to kick start things. You will still need a Container even once education is democratised. You need to be able to control supply and demand to make money. You need to give your solution shape and form. The bigger Container is the market. When you have an overview and understanding of the market, you can get a good idea of the problems, and skills and knowledge needed. Then understand the barriers, and form a space that includes you.

Positioning

One More Step

“Fitting the curve” is when you take the results of an exam and change them to fit what is “normal”. Through squashing, stretching, and standardising unexpected shapes. If a group has an average, almost no one is average. A Standard Deviation is the average amount each result is different from average. Again, almost no one is the average amount different from average. “Normally”, about 68% of results sit between one Standard Deviation below and one Standard Deviation above the average. 95% sit between two below, and two above. 99.7% between three down, three up. That we do this for exams results shows that the goal is not education. It is sorting. Most education is designed to find your role in the world. This is the exact opposite of what we should be doing, and limits everyone to their starting point. Like Samwise Gamgee, the step you need to take is to realise the story is not about you. Education should be about understanding, and solving, the problems in the world. And financing the things that aren’t problems, but need money. At some point, you need to take the vital step that snaps the connection to the constraints you don’t find helpful.

Normal Results

Investing in Ecomaps

I am eagerly anticipating Brandon Stanton’s book “Humans”. A large part of our collective social capital is that we aren’t alone. Our lives are path dependent, and our perspectives limited, but that helps us see better as a team. Like blocking out the light so your image is clearer on your lockdown video chat. Not seeing, is a part of seeing. Most stories of financial security start with a source of income. Before that, you have to develop the appropriate skills and knowledge. Appropriate to the target job. Appropriate to your starting circumstances. Appropriate to your finances. To do that, you have to gather information. I had two gap years between school and university. Lots of conversations. There was no LinkedIn to see a world’s worth of career paths. I benefitted from the privilege of amazing teachers, introductions, and friends of friends. An “Ecomap” is a diagram used by social workers showing someone’s social and personal relationships. Books like Humans and tools like LinkedIn democratise the lessons freely available if you pause to gather information. If you invest in your Ecomap.

Financial GPS

The world changes fast. But not fast enough (yet) that it is not worth modelling where you would like to be on a few people who went from (a) roughly where you are now, to (b) roughly where you want to be. Opening your ears to case studies. “The world isn’t fair. If it was, you’d be much worse off”, a friend of mine tells his kids. We can’t all plug the same destination into our financial GPS. We can map our point of ignorance, and develop skills and knowledge. I was good at exams. A disciplined studier and ruthless time manager. Talking to people made me think “hard but possible” was a great competitive advantage. In the box thinking. The hard box. I studied a 4-year Business Science degree at the University of Cape Town. I then kept the momentum with work and study doing three professional qualifications. A lot of this was mapping to people ahead of me. Do I want to do what they do? My eventual answer, was no. I map bits of various people. Channelling them as I need to. Accepting that life is a bit of a game of alternative realities. The combination of destinations is my own.

Global Positioning System

Being Able

“The Forwards win the match. The Backs determine the scoreline”. Sometimes what is true in Rugby, is true in life. In 117 appearances for the Springboks, prop forward Tendai Mtawarira (“The Beast”) scored just two tries. That wasn’t his job. The Corona Virus has brought to the front of our consciousness the importance of Endurance and Resilience. The importance of a strong Base. Being able to hold still. With strength. It has highlighted the importance of being able to take the hits. Being able to push forward a few centimetres at a time. Human Beings aren’t simply productive assets in a chain of pass-the-parcel hand-to-mouth living. The foundation is simple. The foundation is being. Being able. Health, Housing, Education, and Food win the match. Meritocracy, Property Rights, Incentives, Passion, Trade, Free Movement, Supply and Demand determine the scoreline.

First, Secure the Base

Growth Rings

If you want to learn about learning, it depends which angle you are coming from. If you want the low hanging fruit, Tim Ferriss is your man. Author of “The 4-Hour Workweek”, he is all about hacking life to its bare essentials through self-experimentation. Finding entry points. Planting seeds. Variety and quantity unafraid of mistakes. Often the barriers to good enough to get 80% of the juice are quite superficial. If you want mastery, learning is about unlearning. Then Josh Waitzkin’s “The Art of Learning” is my bible. Stripping back. Finding out what is unnecessary. Simplifying. He calls it “making smaller circles”. Embodying knowledge requires autumns and winters. Periods of difficulty that show us what really matters. That allow the essential qualities to add another ring to mark another period survived. An essential part of endurance is the experience of having endured.

Goals and Values

The most traditionally successful people I know are also the most pragmatic. The world tells you the answers if you are willing to accept them. It is people who are trying to change the rules (like me) who rage against the machine. The people who question traditional success. But if traditional success is your goal, don’t rage. Past Papers (know the answers the examiners are looking for), First Principles (know the tools), Practice, and Habit Building will let you pick off the menu. You start by finding out what is on the menu. What are your values? What is your goal? Whose life? Whose job? Then you find what skills and knowledge they needed. What was their path? Is that path open to you? If not, why not, and what can you do to change that? If you can’t change it or the cost of changing it is too high, what is open to you? Then you crack on and do what needs to be done. Just make 100% sure that is really what you want.

UCT Sports Hall - Exams as Sport

Humans of Security

I enjoy the “Humans of New York” series. Little stories about real people. The stories we hear tend to be about outliers. People blessed with extraordinary talents, resources, or opportunities. The path to that kind of glory is limited. It is incredibly useful to have the Satellite Navigation of a mentor or community where you just need to do what needs doing. Next best is a decent road map. Being able to choose a destination (a person doing roughly what you want to do), and then plotting the journey (developing the skills and knowledge necessary to do what you want to do). LinkedIn helps. Lots of people effectively openly share their abbreviated CVs. Paths on display. Case Studies. Step One to Financial Security is getting an income. First, that requires listening to as many people a few steps ahead of you as possible. Opening your eyes to “Best Practice”. Then taking each step consciously.

Mother Mutual

Money is made in containers. We don’t have the same menus. Resources, Skills and Knowledge mean the answer to “how to make money” is not the same for all of us. The same action doesn’t necessarily deliver the same result. Partly because, in full context, it isn’t the same action. What you see isn’t all there is. The first company I worked for was nicknamed Mother Mutual. There was job rotation. With reciprocal loyalty you could “pick from the menu”, and build along the path to the job you wanted. You could identify a Mentor and see which departments they had rotated through to develop the skills and knowledge for their Container. The Company was prepared for you to do jobs where you weren’t qualified (with faith) because the goal was long term. With vision, you can be your own Mother Mutual. Get an idea of the paths that are available. Don’t panic. Break it down into steps. Build the skills and knowledge you need for the container you want.

Picking from the Menu

Gaping Hole

The gaping hole in my thinking about Financial Security is that most people can’t do what I did. They don’t have the privileges I had. That was part of the plan. When I looked at the way the world worked, after I stopped sulking, I picked something with barriers to entry where my privilege gave me the appropriate tools. I joined a (closed) profession that offered skills in an industry with a product as boring as they come. We know people die and get disabled. People are expected to be productive assets, so if they can’t earn, it’s a problem. Earners need Insurance. Insurers need Actuaries. Actuarial Science is hardly sexy and there aren’t many Actuaries. I used my Maths, Stubbornness, and brute force to build an Engine big enough to pay a Basic Income at roughly the size of the Median UK income. That is my Polyfilla. There are significantly easier ways to earn the Median UK income if that is sufficient for you. The hard part was when I looked at the way the world worked, I wanted something different. So, I first accepted it. Hard. Then I built something that would stop me from cracking.

About You

Time, Delayed Gratification, and Demonstrable Value Creation. 15 years. Half of what you earn. Reinvesting Real Return. There is nothing sexy or clever about my prescription for how to create Capital that can work for you, so that you can make choices that aren't constrained by money. It doesn't even solve the "Catalyst Question", which is harder. How do you get an income?

I grew up in Apartheid South Africa. Many of the foundational stories I heard came from the hard times in the Bible, and the frontier stories of self-sacrifice (like Rachel De Beer and Wolraad Woltemade). No get rich quick schemes to solve problems. Time and hard work.

If someone promises you Financial Freedom in a few months, you are probably the product. Be careful when the music stops. I know my two cents sounds like a wet blanket. It often is. When people have a good few months, or a good year, I am probably not the best person to celebrate with. I am interested in good decades. In underlying sustainability. In what is going on beneath the surface, and does it have the capacity to carry on carrying on.

Rather than a clever idea or thinking outside the box, my own approach was to lean into my Privilege. I was good at maths and exams. STEM subjects provide barriers to entry because the jobs they create require the time (and money) investment. Open secrets. I did a Business Science degree in Actuarial Science because not many people could, and it paid dependably well. I also did it because an Insurance Company was prepared to fit the bill in exchange for working for them afterwards. I followed up that degree with professional qualifications. A profession is a ticket to a set of skills others can't just say they have. A barrier to entry. The definition of in-the-box thinking.

I really can't provide great advice to people who aren't on a similar path (e.g. studying Actuarial Science, or another high paid profession). Starting small businesses is hard, and the Corporate World and regulations are biased towards the big players. LinkedIn (networking), Amazon (logistics), and other platforms (Uber, AirBnB etc.) are providing interesting new angles, but I still think it boils down to developing Skills and Knowledge that solve problems. It is true that you don't need University to develop real skills and knowledge that solve problems people are will to pay for.

Whatever that source of income is, then the steps I mention do kick in. Time, Delayed Gratification, and Demonstrable Value Creation. For me, I invested a significant portion of what I earned for a long period of time in businesses that were creating real value. Nothing clever. Because of Equity Funds and Stock Markets, the public can get their money jobs in the way individuals struggle (your money doesn't need a CV). A dollar from me, from you, your plumber, or from Bill Gates is all exactly the same. Our skills and knowledge no longer matter.

The whole point of Engine building is that it doesn't have to be about you. You don't have to be constrained by the cards you are dealt. Except we are. Until we build the Capital to release us, our stories will be all about us.

There is a whole world beyond that. A world beyond people being productive assets. 

Graduation

Boring Box

Money is made in containers. We spread the story that Entrepreneurs need to think outside the box. To generate excitement. The reality is that if they do, they also need to come up with a box. A great idea is not enough. I didn’t think outside the box to get my Financial Security. Professions provide off-the-shelf containers. Through prolonged training and qualifications, they limit the number of people who can offer the service. You can’t just say, “good idea, I think I’ll do that too”. They also restrict who this opportunity is afforded to. They box. Money makes money. Capital compounds. But there needs to be a source. Education is still one of the most effective ways to tap that. Particularly if it is a known, stable, boring problem that is unlikely to disappear. Yet still one that regularly needs solving. Like exercise and dieting. We all know what needs doing, we just fancy a doughnut and the couch more. A boring source can feed all sorts of fantasies later. Boring is an effective box.