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

World to Discover

Arya would be a good patron saint of financial stability. Not just because she started small in the eye of a storm, completely alone. Not just because she invested deeply in skills and knowledge in a world that seemed to cast her aside unnoticed. Her superpower was realising that the story was not about her. A girl has no name. Yet… all who pay attention know what happened. Making money boils down to being able to clearly articulate an ask, and an offer. If you are willing to listen, the market is constantly screaming signals. If there is no money to be made, it means there is too much supply of that solution. If there is lots of money to be made, then there is not enough supply of that solution. The trick is being able to redefine yourself. To have a feedback loop. To be able to adapt, adjust, and accommodate. The trick is figuring out ways to overcome barriers to entry (education, networks, capital, regulation, prejudice) and barriers to exit (ego, sunk costs, identity, dependents, community). To develop the strength, flexibility, and control to move autonomously through the noise. Then, the world is yours to discover.

 

Much to Well

My path to financial security involved very little out the box thinking. The cold hard reality of London visits while I was working as a Gap Student (teacher’s assistant) made me think 100% pragmatically. I wasn’t starting from nothing. I had already had a great education that gave me options. Networks and education are a form of capital. I studied full time for 4 years, and part time for 4 more. My formal earning period was the decade from 2004 to 2014. I had few enough external obligations to build an Engine. Capital that could earn income. I could decide I had enough. That is the out the box thinking. “How much is enough?” usually comes before "more". To attempt stepping away from filtering my productive hours through the rules of money, constraint had to be self-imposed. I still work. Mostly unpaid. I still tend the Engine, and if I spend consistently more than it makes, it will go bang. A different kind of stress. If the unexpected pops its head, I have to do repairs. In a world addicted to growth, this is a question we are all going to have to answer collectively. When does measuring growth shift from how much we consume? From how much to how well? And obviously, I am able to ask these questions from a very privileged position. The box that matters is shared.

Dismantling Apartheid

Financial Security is a team sport. The former Mayor of South-Central Durban, Theresa Mthembu, invited me to her home in 1996. It was the first time I had been to Umlazi. I grew up along the route of the Comrades Marathon which winds its way from Durban to Pietermaritzburg. I was in the White bits. The other bits were further from the main artery. I spent two years in the UK in ‘98/’99 and moved here again in 2008. To me, in my “English Speaking World” bubble, it is irrelevant whether what separates me from poverty is the valley of a thousand hills or the hills of Oxfordshire and then the Atlantic Ocean. Racism was never a “South Africa Problem”. Apartheid was never a South Africa problem. We are all connected. We just create artificial divisions that allow us to live in bubbles of self-determination. I can’t unsee that visit as a 16-year-old. But the system we live in didn’t change that day. Just my personal practice of dismantling it. Starting the only way I can. With myself. Every day. For the rest of my life.

Dismantling Apartheid is a Marathon

Look Up

Too many of our financial decisions are made based on a multiple, or percentage, of income from labour. Labour Income is a fragile, isolated, building material. The most obvious dangers are death and disability. The more sneaky ones are furlough (a new word for many in 2020) and redundancy. Double Income households hide the fact that unpaid work still needs doing. They also increase the amount lenders are willing to loan, without actually building houses. So the price goes up. Even sneakier is “longevity risk”, the danger of outliving your money once you can’t earn more because of old age. Add to that Financial Emergencies that get funded with debt, so that income ends up paying off past expenses rather than gradually creating wealth. We hide our addiction to hand-to-mouth living behind the shield of “Work Ethic”. The idea that if you don’t contribute, you shouldn’t earn. Fear as an incentive. More robust roots would see people as the best placed local authorities to solve problems. It would empower decision making of communities. It would invest in foundations and buffers independent of personal income generation. Solving the hand-to-mouth problem allows us to breathe, look up, and create. Sustainably.

Rotten Building Material

Handcuffed

Hand-to-mouth living stumbles when the hands get cuffed. The mouth stays hungry. The most widely accepted form of Engine building is Pensions. We get that one day we will have reduced capacity to earn, but we will still need to live. Many Pension Funds started as Pay-As-You-Go which meant working members paid the pensions for retired members. A legitimate Ponzi Scheme. As long as new workers joined, they could support new retirees without any Capital. There has been a big shift to self-funding. Building up your own Capital over your working life. In part because we are living longer, so there aren’t enough working age people (hands) to support more and longer retirements (mouths). “Work Culture” where you spend what you earn without building a Buffer or Engine is equally precarious. I believe in a world with underlying financial security (Universal Basic Income) and individual Buffers (Emergency funds for 3-6 months) and Engines (Capital to contribute your Earnings when you can’t work). Nothing happens the way we planned. We adapt, adjust, and accommodate. That requires planning for when you can’t do that thing you do.

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.

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.

Minefield

I started my career at a tumultuous time for advice givers. I explicitly didn’t (and don’t) give advice, but I gave technical support to those who did. I get uncomfortable about the risk transfers that go on in advice giving. The person paying thinks their job ends there. Releasing responsibility for their decisions. The regulators jump in with frameworks that oversimplify what risk is. The advisor is stuck in an odd space trying to make the economics work in a minefield of conflicts of interest. The industry was changing from a model where product providers paid up-front commissions to a fee-for-advice model. A “Polis Smouse” (policy hawker) would simply try and sell investment and risk products, and then churn them by selling another a year or two later. Fees are supposed to encourage independent, objective, advice. The challenge is that is expensive. Good advice is bespoke. It is a relationship. It doesn’t simplify risk into high or low. It sees the person and risks as the complicated beasts that they are, and cares. This is still an unsolved problem. The economics of transactions simply don’t work when the product is a relationship. My view is the answer lies in building financially secure communities. Empowered Local can handle complicated.

Embodied Thinking

The danger of elevating and separating thinking and work lies where we become disembodied. As Ken Robinson warns, when you start treating your body “as a form of transport for your head”. I read and write regularly about building endurance, resilience, and creativity. A base for this is financial security. There is truth in the saying that there isn’t a special entrepreneurial gene, most wildly successful entrepreneurs are just rich kids with safety nets. Safety nets aren’t just financial. Our physical health, community support, and an embodied approach to life is just as, if not more, important than a good idea and starting capital. There are good ideas, and there are good business ideas. Some are both. We destroy some good ideas by trying to filter them through the constraints that make them good business ideas. We also destroy some business ideas by not partnering them with good ideas that provide the qualitative environment for the lives we are trying to build. Even the things that aren’t connected, are connected.

Invisible Hand

A Universal Basic Income is a periodic cash payment without means-testing or work requirement, paid to everyone in a community without conditions. It is paid to an individual rather than a group, and is not withdrawable. Adam Smith’s invisible hand was a recognition that much of our knowledge is Tacit. Making decision several degrees of separation away around a board table loses fidelity. Just like the children’s game where you whisper a secret along a chain. Trade releases value when both the seller and the buyer believe they benefit from the swap. They don’t have to be able to clearly articulate why. They don’t need someone to represent them. A UBI doesn’t need to be tax funded to meet the definition. We could build Engines of Capital to power the stream. Managed to last. Managed to reduce the panic of life’s little (and big) surprises. Managed to release creativity through spreading Financial Security.

Basic Source

Building Financial Security starts with a source of income. That requires skills, knowledge, and something as obvious as a punch in the face. Jobs. I come from a country where there are more than 10 million unemployed people. Roughly the same as America and Germany combined. Where Great Depression level unemployment is structural. South Africa has car guards, petrol attendants, and people to pack your groceries at the till. Fake work because of a belief that killing someone’s time equates to the dignity of working for a living. Part of building Financial Security is a belief that it is okay for Capital to work for money, so that we can spend our time on other non-monetizable things. I believe we can build Community Wealth Funds, Sovereign Wealth Funds, and personal Engines to provide ourselves and others with security. To provide everyone with a basic source.

Mont-Aux-Sources in the Drakensburg

Source of the Tugela River

Feeding the Beast

Debt is the dark underworld of Engines that empower financial freedom. The Stranger Things of the idea that money can work for you rather than you working for money. I think of money as a “Mini-Me”. If it is in cash, it is sleeping and waiting. Getting wrinkly and losing muscle mass (inflation). With almost zero interest rates, there is no incentive for others to pay you a reasonable amount for short term access to your Mini-Me. Bonds are when you loan your Mini-Me out. That is where “Good Debt” sits. If someone can put your Mini-Me to work, and pay you the salary. Equity (a share of a Business) is when your Mini-Me works for you. “Bad Debt” is a Stranger Things Mirror-Engine. When you borrow to spend or survive a big knock. When the interest rates are so high, it can quickly swallow the whole amount you initially got… and take on a life of its own. Demanding to be fed. Step 1 to financial security is getting an income. Unfortunately, for many… even that step may simply be to feed the beast.

Bits Moving Independently

Most of our money thinking is focused on the “profit line” – earnings and returns. Yet despite the wide range of incomes people get, the vast majority manage to spend it all. Hand to mouth living, even if the hand and mouth are very big. Like the limbs of a drummer, genuine Financial Security requires the bits to move independently. You learn more about spending habits from people who earn less than you. We have fixed expenses each month, we have the ones we can control, and we have the predictable surprises. You can get a sense of that rhythm. Then don’t let the beat change when the earnings and returns get funky. “Save more later” is a nudge where you commit to put any increases to work rather than spending them. There is obviously a bare minimum below which putting anything aside is incredibly difficult. It is what makes poor parents who sacrifice so much to get their children a better education so impressive. Creating music starts with the hard graft involved in training your limbs. Hard, but not impossible.

Bits Moving Freely

Red Flag

I don’t believe in Get Rich Quick schemes. If an idea is too easy, then several red flags come up. Is it wealth creation, or wealth extraction? Is someone being manipulated because full information is being hidden? Is it a Pyramid Scheme where a few people get paid well till the music stops playing? What’s the trick? I believe in the power of time & compounding. There is no trick involved. Neither of those work without a source. Initial ideas can be straight off the menu. What are the options available for work? What are you best at, that can generate the most money, in the most tolerable (and enjoyable if you are lucky) way? What skills and knowledge do you need to develop? Then it is a dance between spending & putting money to work. The bigger the gap between your hand & mouth, the more money can get a job. With time, you can build a Buffer and increasing Financial Security. Financial Security can grow into Financial Freedom. As individuals, and as communities, I believe it is possible to build Engines that can open up entirely different ways of deciding how to spend our time. We don’t have to live hand to mouth. Capital can work so that Labour can love. Capital doesn’t need schemes. Capital needs time & space to compound.

Conspicuous

Conspicuous Consumption is spending money on luxuries in order to signal economic power. It is meant to provoke the envy of other people and raise social status. Often it is more a sign of someone who is “newly rich”, to signify a jump in the standard of living. Conspicuous Consumption is a form of stupidity tax. Paying excessively for something is firing the money. Money that is spent can’t work. Money that is spent can’t grow. Conspicuous Consumption can also be debt financed. The big house, fast car, flashy jewellery, and lavish feasts simply committing the person to having to do work to pay for that later. Ironically, someone earning R10,000 a month can be closer to financial freedom than someone earning $1,000,000 a month. Financial Freedom depends on the dance of the money coming in, and the money going out. What you see doesn’t tell the whole story. Time does.

Say No

There is a bitter irony in the tying of the means of production to labour, and the responsibility for looking after the worker to the employer. Hand-to-Mouth living binds the person’s survival to their labour. A Minimum Wage restricts the work that can be done to that which can explicitly be monetised sufficiently. If we worked towards a world where everyone had sufficient Capital to ensure survival, then everyone would have the most powerful negotiating skill there is. The ability to walk away. The ability to say the word, “No”. At that point, people will do the work they want to do. If you need a person to do the work, you will have to make the work attractive and remunerative enough to appeal to them. True freedom for workers would be if they were all Capitalists.

Labour

Lost in Abstraction

When children think milk comes from the shop rather than the farm, perhaps we have taken abstraction a little too far. The same is true of investments. However you wave your wand, there is a “look through”. Numbers are meaningless in and of themselves, unless they represent something. Fundamental Investing is the attempt to break through the noise and see what is actually happening. I like to think of it as getting my money a job. Listed Equity provides the opportunity to buy a slice of a real business. To become a part owner. I aim to get my money 20-25 jobs. In the same way as a person would do it. Find companies doing something well where you can buy in at an attractive price. Then give the money space and time to get the job done.

Advice is Autobiographical

All advice is autobiographical. As we stumble through the madness, we learn lessons. These can feel like dramatic insights we evangelically want to share. Without context, the broadcasting of these views is simply telling our own story. In a transactional world, people will often pay for advice. Paying for a slice of other people's stories to mix into their own. The results will always be different.

"All Advice is Autobiographical" Austin Kleon

I am clearly noisy. I don't hold back on sharing my story. I am significantly more nervous when it comes to giving advice. I always worry about "what if things go wrong". I don't like the idea of bumping someone else's story and then them turning back at me with a glare when they crash. I find keeping a vague sense of my own control tough as it is.

I am also aware that I have no idea what it must be like to be in other people's situations. As the world stretches and we struggle to define Global and Local communities, our lives stop being replicas of our parents, siblings, friends, and elders. There are really very few people to turn to with significantly similar stories, but one step ahead. There are very few adults. We are all pioneers in a world that is changing rapidly. Work, relationships, and communities are all blowing around in the wind.

I talk a lot about money and financial security. I don't like this. I would far rather be talking about other things. It was my distaste for being controlled that led me to aggressively try gain financial freedom. My superpower is delayed gratification. If something hard needs doing, I would rather do it first. Ofen grumpily, but I will do it. With the elusive carrot of "can you just leave me alone now?" dragging me along. I looked at the menu I had, and picked the thing that would get me this freedom. I spent significantly less than I earned from as early as possible, and got my extra money a job. Until I felt like I could constrain my spending enough to let my money work, and be left alone. I love being left alone.

This is not an option for most people. I know that. It is an option for a lot of people who choose to constantly improve their lifestyles as their earning capacity expands. We live in a world in which the life you live is largely determined by the work you do. The lifestyle to which we become accustomed is determined by our work's market price. Which becomes our price is we spend most of our time working and live hand-to-mouth. Constantly expanding into the gaps. 

The harsh truth is every financial decision has tradeoffs. If you have the skills/knowledge or the capacity to develop them, then you can have whatever "thing" it is you desire. With consequences. The challenge is broadening your vision wide enough to choose the whole package consciously. No decision is isolated.

That is a problem. A bigger problem is the people who can't even get the process started. Who aren't even in a position to cut back their spending because they aren't spending. Step number one in Financial Security is finding a source of income. There is a basic amount that you need just to play the game. There are Billions of people who don't even have that. Who are under incredible financial stress that keeps them gasping for breath. Not false gasping because of choices. Gasping because of exclusion.

That is where my advice falls really flat. That is where for my advice to mean anything, I have to be asking far more questions than giving answers. I have never been in poverty. Even when I felt poor, it wasn't poor... it was just my allergy against being controlled flaring up. I had choices. I made them. 

My sense is the people who are best placed to give advice are those whose stories resonate the most. The ones whose lives are closest to those with similar problems. I love the "Humans of..." series. The more stories we make a part of our own, the more relevant the words we release. Our ears are likely to be better problem solvers than our tongues. Your answers are likely to be much closer to you, than they are to me. Close enough to hear if you are paying attention.

Good Idea

There are good ideas, and there are good business ideas. Some are both, some are one, and some are neither. The more you accept what it takes to make a good business idea, the more you can work towards empowering all your good ideas irrespective of their ability to make money. The first step is a clearly identified need or want. A problem that needs solving. A problem that needs intervention by you. The second step is to be able to clearly articulate and communicate that problem. To paint a picture of how things are, and how they could be. To convert that imagined reality into a decision through a degree of urgency or priority over other problems. The third step is to have a container through which you can monetise that problem-solving. Something you can count and limit. If those three steps can’t be achieved, it isn’t a good business idea. It may still be a great idea. Not everything is a problem that needs solving. Not everything is urgent. Not everything needs intervention. By building an Engine using good business ideas, you can create the Financial Security, and Freedom, to pursue whatever source of Fulfilment sparks your creative fires. That, is a good idea.

Good Idea, Good Fire