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

Choose your Mountain

20-year-old Trev also had long hair. Grown during a two-year stint in the UK on a work-travel visa, in between school and university. It was the first time I had left South Africa (I had only ever even been to Cape Town once when I was two, which felt like the closest foreign place to Durban). My bravest previous adventures had been crossing the Vaal river to visit the family who said Fish with an accent. Young Trev was also a curious spirit, but those two years exposed him to how daunting a London you cannot afford is. Sitting on a bench in Kensington Gardens, he/I took the decision to accept the world hard. Money is made in containers. One of the most defendable containers is hard. Actuarial Science is not on the covers of flashy magazines, nor does it have sexy movie leads (“About Schmidt”). It does however require serious knuckling down, which creates a deep moat. A Competitive Advantage is not what you are good at. It is why others cannot do that. The mountain of professional exams is intimidating. I am grateful to young Trev that that did not scare him. It scares me. Money is made in National Containers. Salaried Containers. Professional Containers. Inherited Containers. Figure out the barriers to entry, and how to overcome them. Hard but possible is good for you.

Actions have Consequences

Karma Yoga is one of the four paths to stilling the waves of the mind. Karma means action. The other three are Bhakti (love/devotion), Raja (meditation), and Jnana (knowledge or intellect). Part of reducing anxiety is understanding how you are wired, and plotting a very bespoke practice that works for you. My understanding of Karma is that actions have consequences. Even though the world is random, complicated, and ambiguous… even the yogis believe in some cause and effect. The waves knocking us around are a function of both current free will and past human action that set the circumstances. Sanchita Karma are the accumulated actions of the past. History matters. Paarabdha Karma are the past actions you unpack in your life. You can change the circumstances. Kiryamana Karma are consequences of your current actions you experience immediately. Each day matters. Aagami Karma are the seeds you plant that affect you or others later. Our actions impact others. Like Fundamental Investing, the idea of Karma is that what we do matters. We have free will. It is just hard, and contextual. We have to do the deep work.

Continual Process of Unpacking

Point of Focus

Some of our waves of money anxiety are memories. Both of our own experiences and those of the bubble we are born into and raised in. These thoughts that push our decisions in various directions may not even be things we are aware of. The Yoga Sutras call memory waves Smriti, and they can be mighty obstacles. Smriti are not all negative. Some generational strengths get hidden beneath dirt, waiting to be rediscovered and polished. Beneath both the positive and negative lies the permanent. The point of focus that lets us unravel all the randomness, complexity, and ambiguity. Becoming aware of our subconscious, conscious and dreams and building a daily practice around that point.

Relative Size of Sun, Earth and Moon

Fat Men Searching

Bob Dylan sings about fat men and thin men looking for dignity. Searching high, searching low. Have you seen dignity? It is one of my biggest quibbles with Adam Smith’s “The Wealth of Nations”. He chips away at the idea of wealth creation as a battle to the death, but doesn’t quite let go of the linear development of the age. There is still the idea of more is better. He just argues we can all have more. Against barriers. For mobility. But he also argues for a greater expense for supporting the dignity of the monarch in an opulent society. “As in point of dignity a monarch is more raised above his subjects“. One of the biggest obstacles to financial security, and even adequate climate responses, is “the lifestyles to which we are accustomed.” Tying dignity to conspicuous consumption. If you want to become financially secure, one of the most powerful tools is to become a Minimalism Geek. Get a copy of “Seneca – letters from a Stoic” and chew on the lessons on how to become immune to life’s setbacks. What people see without effort, is not who you are.

Wealth as Opulence

Louis XIV of France "The Sun King"

Reigned 1643 -1715

Good Enough

Meritocracy isn’t supposed to be a defence of privilege. It is the idea that capital and power get allocated on the basis of talent, effort, and achievement rather than wealth or social class. Similarly Capitalism was historically a push back against Mercantilism. Mercantilism looked at Nations as competitive containers designed to win. The aim, it was thought, was to maximise exports and minimise imports. Sell lots. Buy little. Win. The policies led to aggressive militaries and colonial expansion. Enter Adam Smith and the idea of Win-Win. Gunboat diplomacy was the use of conspicuous naval power to use the threat of war should the “negotiation” terms not be in line with what the stronger power wants. Smith made the convincing case that trade and reduced barriers to entry benefit everyone. Similarly, with Meritocracy, we only half heartedly want it. Limited, networked, job and client opportunities mean people are still suspicious of reducing barriers to entry. Meritocracy is now used as a defence of privilege as if conspicuous gunboat signals mean the advantages are deserved. The reason people don’t want real meritocracy is because they walk around thinking they are impostors. We all worry “I am not good enough”, if a great people sorting sees our flaws. 

"Seaport at Sunrise" Claude Lorrain (1639)

Get Out

In a knowledge economy, the key asset is the people. There is no real intellectual property (IP), because people aren’t allowed to be property. They get to leave if they want to. There can be the illusion of IP with processes and stories that people buy into. There can be a tipping point of people that other people rely on. Internal groups might not leave, unless they leave together. It makes sense that lots of companies will therefore operate on the basis of a club mentality, where loyalty is more important than real merit. There are strong barriers to us unwinding privilege and prejudice because to do that properly, you have to invest in people who might not stay. Closed communities aren’t interested in individual meritocracy. They want the community to do well, irrespective of the community’s merit. In the same way as we personally want to do as well as we can. We don’t refer potential opportunities away from ourselves and towards people we think are better than us. The real way to reduce privilege is to reduce barriers to entry, and barriers to exit. Make it easier for people on the inside to get out, and people on the outside to get in.

Eagles and Choices

Ironically, wealth also limits your career choices if your community believe they are self-made. As the Eagle’s Nest gets higher from the ground through compound growth, being pushed from the nest either requires hereditary financial support or cold hard reality. Price is not value. Skills and Knowledge are necessary, but not sufficient to make money. STEM (Science, Technology, Engineering and Mathematics) and Finance degrees focus on things you can count. You need to be able to count something to charge for it. You need supply barriers. You need a way to control demand. If a community keeps its spending low, then the entry ticket for that community remains low. You can choose a career that pays modestly, and focuses on value creation. The wealthier a community gets, the higher the entry ticket gets. Then, without hereditary support… you either need to go down the STEM/Finance route to make your self-made way… or the Eagles need to chip in. Not all good ideas are good business ideas. 

Pic: Murray Faubister

Moron with Money

If you understand Compound Interest, then you understand Privilege. The same “merit” applied to more Capital will result in a bigger reward. Reinvested rather than spent, it can grow. That is why hereditary privilege is a part of generational wealth creation. Our lives are short. If we spend everything, the next generation is always starting again. Starting without a buffer for emergencies. Starting without space to breathe. Money making requires skills and knowledge, but is completely ambivalent to the back story. Unless we add barriers to entry. Institutions, networks, communities, inheritance, prejudice and regulation. Real merit doesn’t care how much effort you put into learning to solve the problem, or who Mom and Dad were. The key is being able to solve the problem. Whether it is because you watched a YouTube video, or studied for 20 years. But. If you are a moron with money, you still get a seat at the table. Again, the back story doesn’t matter. Money is the story. Real meritocracy would be smart money. Able to connect people with voices hidden by their lack of capital. Money that understood history.

Timbuktu Manuscripts

Knowledge and Capital are Intergenerational

Shifting Focus

You may not realise it, but you have a problem. I can solve that problem. There is no one else who can. Manufactured inadequacy. Projected confidence. Illusionary exclusivity. There is a reason why wealth is a team sport created in bubbles. If you genuinely care about the person, and your lives are connected, then creating a problem to extract wealth makes no sense. If you have a relationship with a person, it becomes impossible to hide that you are as confused and incompetent at most things as the rest of us. That you are just doing your best. If you care about someone, you stop looking for someone “better” to replace them, because the key is time spent. The person matters. Nepotism, Hereditary Privilege, Patronage, Clubs, and other forms of anti-Meritocracy are incentives. They shift the performance spotlight to a group bigger than ourselves. They make room for vulnerability. Family, children, friends, and community. They also have unintended consequences. I don’t know the answer, but the question is how to see real problems, be honest about our ignorance, and see the strengths in others that are not ours.

"American Progress" John Gast (1872)