Understanding Connections

What we do, matters. What has been done, matters. History plays out its consequences. For me, being (randomly) born in South Africa at the tail end of Apartheid had, and has, consequences. 

I come from a family where politics was discussed, but I can’t remember the Rubicon speech. I was just starting to form memories, and that was not one of them. I do know it was a difficult time. 

As a kid, you are really just aware of being a kid. You gradually gain consciousness of the world that you are in. In the first few years after you are born, you don’t even have the place to store your memories. You are just experiencing. It takes time to realise that your parents are separate individuals from you. 

We all go through the terrible twos and tantrums, and discovering our Ego. Discovering that we don’t necessarily have to listen to all the instructions we are given. There is a process too of realising that there is a world beyond your family. A world beyond your school. A world beyond the groups that you are a part of. Gradually we get the chance of understanding our place, and our history. 

There is a concept called the “veil of ignorance”. What rules for the game would you create if you didn’t know which character you were going to be? 

I was 14 in 1994 when the first democratic elections took place in South Africa. Part of grappling with my story has been the existential crisis of being a white male South African. Without falling into the trap of self-flagellation, what is the balance between playing the cards you have and understanding your connection to the rest of the world?

Me, in a group in the year Apartheid ended

Who Are You?

The thing you are (currently) doing does not define you. Knowing who you are, is the heart of choosing a path. The practice of Neti Neti (Not this, Not that), is realising that you can’t be something temporary. Problems should not be valued in and of themselves, or you are not really trying to solve them. You are making yourself a permanent part of the problem and extracting rent. You only genuinely try solve a problem if you feel a sense of ownership. Then it is worth your while to make your role in the problem redundant. Redundancy becomes something worth celebrating. If you make yourself redundant and there is no commitment to you as a person, then you are let go. They’ll say, “I paid you. It’s fair”, and lose no sleep. But that is not the point. Value is created over very long periods of time. Real meritocracy starts with the grunt work of building foundations. If you are building something long-term, there needs to be a deeper commitment. Participation, while you are involved, becomes all about ego and identity. Real wealth is created when you have a significantly more stable self-definition to reinvest in. When you have a path that learns, builds, and creates in a way that is connected to what really matters to you. 

Self-Definition

Losing Focus

There is a conflict between the idea of “leave your ego at the door” and meritocracy. If we believe in a world where the quality of life you can live is determined by your “underlying permanent” skill and knowledge, then constant evaluation of an individual’s fundamental intrinsic worth makes sense. If you believe in Elite teams, then you need to be regularly dividing people into groups that are good enough, and not good enough. The justification for meritocracy is that all boats rise if resources are pushed to those who are the best. Not for spending. For reinvestment. Politics is bound to be brutal and closeted if you pretend to be gods. Ego gets left at the door when it is all hands on deck to find solutions. When someone is confident enough about their place that the focus is on the problems, not the person. If you are surrounded by naked emperors, the focus is likely to be on, smaller things.

Graffiti in Tartu

Bread Winning

It is easy to get caught in the trap of “defending a narrative”. The story we tell ourselves about ourselves. The real world is vastly more complicated than the TV series, movies, and even books we consume. The plot is not nearly as neat. When I stepped away from the corporate world in 2014, I liked the story of saying to myself I had retired at age 34 and had a big enough engine to be a home maker rather than a bread winner. I (still) believe not all good ideas are good business ideas. There are plenty of good ideas that get ruined by being forced through the monetisation filter. Not everything worth doing can pay for itself. In 2015, I resigned from my three professional qualifications. The amount of work that went into being able to say “I *am* an actuary” was simply the tool I had used to build my engine of capital. I reinstated that qualification in 2017, only two years of no-money later, to do engine repairs. I am now thinking of going through the process of brushing off the others. Turns out life is more conversational than story telling. We get to edit our interpretation, and must constantly adapt, adjust, and accommodate.

Someone's Pitch

Money making boils down to solving problems. If you genuinely want to create compounding momentum, you must repeatedly make yourself redundant. To confidently do that, you need a sense of ownership. To feel part of a solving container. Otherwise, once you have a solution, why ask you again? There are 7.8 Billion people on the planet. As Warren Buffett says, “You don’t have to swing at every pitch.” You do not want to be someone’s pitch.

The other more cynical path is to make yourself irreplaceable. Create problems only you can (pretend to) solve.

I do not like that path. I like the path of genuine and honest problem solving. That requires trust, ownership, and inclusion in the containers we build. A strong enough commitment in a relationship to share the truth. One of the reasons we do not talk about what we earn, our real weaknesses, and what we do not know, is it can solidify internal waves of anxiety about inadequacy.

Which means there is a level of darkness about what opportunities are available. Which clogs up realistic paths of skill and knowledge development, and leaves solvable problems scabbing our eyes closed.

You are not the problem. The problem is the problem. Treating people like pitches, turns them into problems.

In Motion

Not Good Enough

When the default is to work full-time for one company, that becomes the container into which we direct most of our energy. I think you get a maximum 4-6 hours a day of really good quality creativity. Where you dig deep into the unique path that has led you to where you are, and connect interesting dots of the paths that have led everyone else to you. The values of the container matter. Lots of businesses, communities and containers discuss “Values” to create an inspirational glue for team members. Often it is platitudes like Excellence and Accountability. That can be a hubris factory. Creating, and sustaining, the idea that those in the container are better than those outside the container. Schadenfreude in the failure of others, and a lack of genuine self-reflection as you defend the illusion of superiority. It is dangerous to categorise others into “good enough” and “not good enough”. We seldom have a complete picture of the story of others. The ability to see them. Relative thinking and comparison is often just a reflection of the voices in the heads of those doing the judging. The voices telling them they, themselves, are not good enough.

Self-Contained

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?

The Gods Envy Us

One of the challenges with investing is when to admit you were wrong. If your goal as a stock picker is to do better than just investing blindly in everything on offer (an index). History is, at least, compelling enough to know that outperforming in 60% of your decisions will raise you to the status of demigod if people give you the credit. But if you underperform more than 50% of the time? If you underperform the benchmark over an extended period? How long is long enough to take the blame? Performance is noisy, which gives lots of space to hide. Going to Zero ends the discussion, but lots of companies stutter along. Max Plank reminds us that Science progresses one funeral at a time. Death is a feature, not a glitch. So how do we know when it is time to let go of beliefs? How do we ensure that we are not so tied to our stories, that we serve them, rather than them serving us? How do you maintain a sell discipline?

"They envy us because we're mortal, because any moment may be our last. Everything is more beautiful because we're doomed."

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

The Power of Grayskull

Risk is not just the chance that something will go wrong. The study of risk goes wider than that. Looking at the complexity, ambiguity, and randomness of the world and asking whether within that, “is there anything that we can rely on?” When you look at an individual instance of something, it is a bit of a roll of the dice. At least with dice, while there is uncertainty, there can only be six clearly defined outcomes. With a coin, there can only be two outcomes. If it is a fair dice, and you roll it enough times there will be roughly the same number of ones, twos, threes, fours, fives, and sixes. If a coin is fair, toss it enough times they will be roughly half tails and half heads. It is not merit that drives victory. Actuarial Science is partly the study of, and attempt to weather the storms of, the underlying distribution rather than the specific result. The distribution is the variety of outcomes that are possible. Alternative histories. A form of “there, but for the grace of God, go I”. What happens if we pool risk, and stop taking full credit for everything that goes well or badly? What happens if we admit that we are not Masters of the Universe?

Mytikas

One of the eternal questions in Investment is “Active vs Passive”. Should you just invest in a diversified index or is it worth paying a manager to pick the stocks for you? Should you invest in an Equity Fund, and are the associated fees “worth it”? Alpha is the measure of the value (defined as outperformance) added by a manager. The Existential Crisis managers face is that this can go to zero (or negative). The facts can unambiguously show you have added no value (as you define it) over the entire course of your career. Often when you are managing the most money you ever have. And after claiming fees and paying yourself a salary. I still believe in active management from a risk management perspective, but I have seen too many fallen Gods to read too much into the tea leaves about individuals. Like Natural Bee Keeping, and Rewilding, I suspect investment is more about being good custodians than claiming a well-rewarded seat on Olympus.

Path Dependent

Learning is path dependent. There is a real risk of Group Hypnosis on the path. Money and meaning are made in containers. Within constraints. With shape and form. It takes time and effort to build these containers. The things we care about, may be connected to things we don’t care about. Things we used to care about. Perhaps even things we think are wrong. We don’t get to pick and choose everything to be exactly as we want it to be. There are trade offs and concessions. We cloak the truth in a shared story or interpretation. There may come a point at which pointing out that the Emperor is wearing no clothes becomes worthwhile. Before that, it may be fine to have a naked ego maniac playing bossman if it doesn’t mess up the things you care about. When he suggests strip poker to take the things you care about, it becomes a little too obvious. Somehow, we need to detach and keep learning rather than defending our container. While still defending the people we care about in the containers. 

Firm Grip

 “tat param purusakhyater guna vaitrsnyam” Yoga Sutras

“The highest awareness of non-attachment stems from awareness of purusha (the Self)”

You are not your job. There are three elements to making money. A problem to solve, Capital to finance its solving, and a Container to solve it in. You are not the problem, the capital, or the container. They are all tools. “What are you going to be when you grow up?” is completely the wrong question. Money making, and waves of money anxiety, are not about who you are. It’s not about you. The problem with performance reviews, job titles, promotions, bonuses, hierarchy, measures of success, apportionment of respect, and illusions of meritocracy is we associate temporary problems and conspicuous signals with identity. We weigh and measure each other. This leads to impostor syndrome and voices in our heads constantly telling us we are not good enough. A firm grip on a more permanent sense of self lets you hold space between waves of money anxiety and your sense of what really matters.

Deutsche Fotothek

Developing a Practice

Yogas chitta-vritti-nirodhah

Chitta is all the stuff of the mind, intellect, and ego. Our awareness. Our anxiety. Our identity. Our conscious, subconscious, and dreams. The stuff that has soaked deep to form the way we see the world, and see each other. Vrittis are thought waves. “This too will pass”, but the danger is when we absorb the waves, and identify them. When we think we are the storms, winds, and rains of challenges that seem to attack us relentlessly. Money Anxiety comes in this form. Fear of where it will come from. Fear of where it will go. Fear of the aftermath it will leave. Once understood, it is possible to develop a practice to control the financial waves. Working with them rather than fighting. Eventually finding nirodhah (stillness). Financial Yoga is developing a practice to still the waves of money anxiety.

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

Home Workshop

I stepped away from the Corporate world in August 2014. I liked the idea of living off an Engine of Capital where my decisions of how to spend my time were no longer filtered by the purpose of my full-time employers. A world free of job hunts, bosses, career progression, office politics, and performance reviews. A chance to internalise and control my own self-reflection and appetite for feedback. I particularly like being my own decision maker. Not having to make proposals for how things should be done to boards or decision makers higher up the tree. Not having to justify or get permission. Making decisions myself. My Engine isn’t big, and it wobbles. I live with a cloud of existential anxiety and my elbows covered in grease doing repairs in my home garage. I live on significantly less than I would if I just got a job. A different sort of stress to the 9-5 of accepting the way the world works. I am making it up as I go along. I think we all are. Even stepping away had its own new set of constraints and pressures. You can’t escape the madness. You can just invest in your ability to cope.

My Grandfather in his home workshop in Nov 2014

Finding Balance

Key Performance Indicators (KPIs) and Balanced Scorecards are ways of managing performance. They are particularly challenging in areas that are hard to quantify and articulate. A lot of my work for money involved taking technical concepts, trying to wrap my head around them, then trying to make them easier for others to wrap their head around. Understanding is incredibly hard to quantify. Trust even more so. It takes years to build, and can be broken in an instant. Particularly if you are looking for reasons or data points to not trust someone. Everyone is holey. Everyone is flawed. A bigger flaw is looking for holes in other people. To look for reasons to distrust. The problem with KPIs is the list gets long fast. So if a task (maintain trust) is “worth 2%” of a year’s assessment, the quantifying or checklist becomes a spurious form of false confidence. Easier is to have a list of things you won’t do. Even better is to have an incredibly short list (three key things), and to trust people. Trusting doesn’t mean being a sucker. You can build buffers, checks and balances. But it does mean accepting that not everything can be controlled or quantified. It does mean building systems that aren’t designed to cut people off like gangrenous limbs.

Elite Team

If you want to be part of an Elite Team, you first have to accept the idea that there are people that aren’t good enough. You have to accept the possibility that you aren’t good enough. That there is someone who deserves your spot more than you. If you push the idea of Meritocracy to its extreme, and believe in surrounding yourself with the best, you need to be consistent. You need to listen to that voice in your head that asks if you are good enough. The impostor syndrome that makes you feel inadequate. That means you have never reached the goal. Elite Teams aren’t about the individuals. They are about the Team. They require sharp knives. Personally, I don’t want to be part of an Elite Team. I don’t care if you think I am enough. I don’t find the question of whether you are enough interesting. What interests me is your incentives. Your passions. The way you create meaning. What interests me is the way you connect to others. What you do every day. That is enough.

Are you the best?

At the Centre

My income comes primarily from my Engine. I spend very little time managing that Engine. My investment philosophy has become gradually more aligned with that of my Yoga teachers and Natural Bee Keeping Father-in-Law. When students love their yoga classes, they can get obsessed with the teacher. It’s not the teacher, it’s the yoga. In the same way my Father-in-Law sees his primary role as getting out of the way of the bees. It’s the bees doing the work. The key advantage I have with investing is I don’t manage other people’s money. This means I don’t have to do any of the fake work required by our activity obsession. I can let the management and staff at the companies do the work. I can get out of their way. It’s not about me. When a problem needs solving, our intuition is to do something more. I believe the real solution lies in the opposite direction. Accepting that problems will arise. That noise is learning. Building structures that can adapt, adjust, and accommodate. That can listen to change. That can rest, heal, rise, and shed in their own natural rhythms. Learning to hold space rather than fill it with our determination to be in control. Our determination to do something where we are the centre of the story.

Prove or Build

Conspicuous allows you to justify yourself. Something you can count. In a world that is complex, ambiguous, and random, having a cause for every effect gives you something to hold on to. An explanation. This inhibits foundational investing. A need to prove swamps the need to build. It makes ego and confidence our primary focus. The most powerful investment forces are time and compounding. The time frames we think in are too short. This means the real impact of what you do is only felt after you are gone. Unless you live hand-to-mouth. Then what you do is felt now. That is the problem. You need a genuine sense of ownership to be willing to reinvest rather than consume. For that to become a habit, until the amount reinvested makes the amount consumed a rounding error. Until you are a custodian. What you see is not all there is. Don’t prove. Build.