The Basics

Start with the basics. “The Five Points of Yoga” are a foundation for approaching any concern. Proper exercise, proper breathing, proper relaxation, proper diet, and positive thinking/meditation (i.e. proper mental health). It is easy to get overwhelmed, and even grappling with the craziness of life can be addictive. I enjoy complexity, and I like being part of the conversation, but it can feel too much. A crippling sense of trying to get it right, or do the right thing. I often feel frustrated with the world, and the way things work, because I care. Seeing the conspicuous and huge problems. Hans Rosling identified five key problems (before Covid) which concerned him the most - the risks of global pandemic, financial collapse (abstract debt and interconnectedness), world war (weapons of mass destruction), climate change (unintended consequences of long term behaviours you realise too late), and extreme poverty. These are huge issues. Particularly if we are gradually deconstructing the artificial bubbles we live in (and allow us to pretend some problems are solved). Which also means it is more common for us not to understand the expectations we have of each other. Biases and prejudice are short-cuts from long embodied behaviours and agreements. If everybody already knows the dance, fewer people step on each other’s feet. All this can be draining. Yet I don’t want to be someone who doesn’t care. I don’t think detachment is running off to a cave. We need to participate, but I like the idea that participation starts with the basics. Something as simple as remembering to breathe.

Within the Chaos

Stilling waves of anxiety starts with separating the temporary and the permanent. What do you want to keep? Holy and worth protecting. What is open to change? Holey and worth allowing to pass. What are the problems you genuinely want to solve? 

There will always be problems. As Nightbirde pointed out, you can’t wait to be happy. Calm exists within, rather than after, the chaos. 

When we are filtering good ideas and good business ideas, business ideas might get elevated because they are easy to contain. The ideas that you can’t contain may be the most valuable. This is not a problem. 

Good business ideas are problems we can solve that we want to go away. Not problems that we want to perpetuate to deliver a rent. You don’t want a good business idea to become part of your identity, because then you will become part of the reason that it doesn’t get solved... making you irreplaceable. 

When something is a good idea, but not a good business idea, it is often something you want to keep. To build on. These are the activities, ideas, and relationships you sustain by building engines of capital. Ideas that are worth spending money on, but don’t generate money. They tend to focus more on abundance, permanence, sharing, and connection. 

For problems that are temporary, we need a process to develop the skills and knowledge to be able to meet challenges and move on. That requires constant learning, reinvestment, and reinvention.

"Chaos amongst the Calm" Nathan Jones

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

Space for Choice

Barriers are how people stop other people from providing certain skills. We all need to eat. Our livelihoods, dreams, responsibilities, and view of ourselves are often wrapped in the “lifestyle to which we are accustomed”. The respect. The security. If you are lucky, the love of what you actually do every day. 

Creative Destruction is when someone comes up with a better way to solve the problem. The “Porter 5 Forces” talks about the intensity of competitive rivalry, the threat of new entrants, the threat of substitutes (alternative ways of solving the problem), the bargaining power of suppliers (the costs of solving the problem for clients), and the bargaining power of buyers (how empowered and willing are they). If who we are is tied to how we get paid, we are going to be very anxious. 

In Life Insurance and Pensions, the theory marries Assets (that make money) to Liabilities (the money that needs paying)… effectively institutionalizing hand-to-mouth living. The idea being that the smaller the assets needed (capital requirement) the higher the return. The problem is the work the capital can do gets defined by the nature of the liabilities. The same is true for individuals. If you don’t build a buffer or capital, then what you can do gets defined by what you must do. That sounds like an unhappy marriage to me. 

Choice comes from space. Choice comes with the ability to adapt as creation genuinely solves problems. Choice comes from us not relying on the problems to remain unsolved in order to feed ourselves.

Space for Choice, Space for Creativity

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

Rules of the Game

Money is made by being able to clearly identify, articulate, and solve problems for decision makers with money. Solving problems requires skills and knowledge, and that is what we traditionally think of as meritocracy. That is not the whole story. Two key factors besides problem solving, are capital and containers. Capital is fungible. It can be allocated (by a decision maker) to any problem, and is not defined by skills and knowledge. Instead, it acts as a buffer and an engine. A buffer to reduce noise and increase the timeframe for planning (ends hand-to-mouth survival decision making). An engine to fund good ideas that are not good business ideas, and to generate more capital. A container is how you get paid. Once the ideas stop bouncing around, how does money move into your account? When? How much? A container is the reason you solve the problem, and not someone else. A container is the rules of the game. The world as it is now. The barriers to entry. The barriers to exit. Making money is not just about ideas, or skills and knowledge. Problems get solved with capital in containers.

Song Dynasty Football

When All Thrive

Fundamental investment management is the simple idea that the job that money does matters. You can trade anything with a pulse. Buying and selling based on a moving price, without even looking at what the price is connected to. Speculating on whether the price is going to go up or down. With fundamental investing, it is the underlying business that does the heavy lifting. A share is a slice of ownership in a real business with real products solving real problems. The price is not just a good or bad deal. Buying or selling is not a way of tricking other people. The price represents Capital that the business is custodian of. If the company handles the complex, random, and ambiguous world in way that solves problems creatively, it should be able to create value. It ceases to matter whether other companies do well or badly. Adam Smith’s great insight was that Capitalism can be Win-Win rather than a battle between Nation States. David Attenborough points out that Nature’s great insight is that a species can only thrive when those around them thrive.

What we do, matters

Being Forced

When I started my business, it wasn’t the dream. I honestly wouldn't do it if I didn't have to. I find having to think about money quite annoying. I like thinking about businesses abstractly. I like problem solving. I like talking to people. It is not that I am lazy. I like learning. I like writing. I don't like stuff that I think is pointless. I don't like it when I feel like I'm being forced to do something that I don't want to do. I don't like a**holes. I don’t like people bullying me or others. I've got a big chip on my shoulder about bullies. I don't want to be in the same room as them. I don't want to help them. And when I don't want to put up with that, I'm not very good at just sucking it up. I wear my heart on my sleeves. I share more than I should share. Which is not great for a corporate environment.  

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

You Aren't The Problem

“Yoga” means “to unite” or “to join”. We grow up deep soaking children with the question, “what do you want to be when you grow up?” and tying them to their earning ability. Unfortunately (and fortunately) not all good ideas are good business ideas, and price isn’t value. This means that what gets paid well is merely a temporary reflection of the balance of supply and demand, till they adjust. Tying identity to earning ability unnecessarily constrains who we are. Money making is not about you. Practicing Financial Yoga allows you to build Capital that absorbs the Financial Waves. It allows you to give business problems their necessary, but not excessive due. It allows you to unite with a bigger container. To power ideas and values that aren’t restricted by what you can control. You, aren’t the problem.

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

Entry and Exit

The simpler the problem, and the fewer people involved, the easier it is to standardise. The easier it is to know the market price. If there aren’t barriers to entry and exit, supply will respond quickly. In April, the price of Oil turned negative. This wasn’t because Oil is worth nothing, even in a world aware that we shouldn’t be digging up dead stuff and burning it like we do. The reason was simply storage was reaching capacity, there was still “new” oil being produced, and no one wanted to pay to store it. Traders often buy and sell contracts for oil with no intention of seeing the oil themselves. They just sell before delivery. If no one wants the Oil, and you are at a computer in a suit (or at home in your underpants), you don’t want delivery. The problem with the question “what do you want to be?” is that we often define ourselves by a single problem. We don’t build in the ability to adjust to changes in supply and demand. Money making revolves around Capital (to survive and invest), Containers (a way to get paid, and to control supply and demand), and Problems (clear ask and offer). Don’t define yourself by a problem. Don’t value yourself by a price.

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.

Five Forces

Significant wealth is created across generations and among communities. Where there is time. Significant wealth exists beyond the world of hand-to-mouth where you consume all the excess you create. Where there is space to breathe. Significant wealth is leaky. Where there are people growing around you. When analysing a business, you don’t look at it in isolation. The “Porter Five Forces Framework” is one way of looking at where a business stands. It always comes back to supply and demand. How much is there? How much is wanted? The five forces are the bargaining power of (1) suppliers and (2) buyers, the threat of (3) new entrants and (4) new substitutes (a better solution), and (5) the industry rivalry (the competition). For anyone to do well, everyone needs to do well. That is why the idea of “self-made” is rubbish. Win-win problem solving is relationship building. Wealth creation rather than wealth extraction. It comes from listening to signals of what needs doing. Gaining the skills and knowledge to do it.  And getting it done. It comes from connection.

Know Their Jam

Money is made in boxes. That is the problem with “out the box” thinking. Most of our problems are not unique. If the solution is too creative, people might not even recognise it. They may not even know they have the problem. If someone wants Strawberry Jam, and walks into your shop and sees Strawberry Jam on the shelf, there may be no words exchanged. They pick the Jam up. Pay for it. Leave. No pitch. No elaborate story. Just a clear ask meeting a clear offer. The trick? You have to know what people want. Know their Jam. Then you have to learn how to make Jam. It’s not a secret. But you have to learn. No one is born knowing how to make Jam. We don’t all have to be Elon Musk. Not all problems are rocket science. Some problems are as simple as paying attention, developing the skills and knowledge, and putting it in a box. Sometimes it isn’t about creativity. It is about time and application.

Traffic Jam

Putting Capital to Labour

The question “What work do you do?” puts constraints on your earning ability. It is true that we live in a world where most people have to be their own financial catalyst. Where people have to be productive assets. But we also live in a world where you can gradually shed those constraints. Where it is possible for money to make money. For Capital to Labour. You can separate the questions, “What do you do?” and “How do you finance what you do?”. What you do doesn’t have to be filtered through the constraints that are necessary to make money. Money making needs something you can count. Not everything can be counted. Money making cares about supply and demand. Value is personal. Money making requires conspicuously demonstrable value. Value can sit beyond words. Lie beyond numbers. Dance beyond containers. You don’t have to be the Best Actor in your money-making story. “What needs doing?”.

"Weaver" - Vincent van Gogh (1884)

Crystallising Creativity

Investing isn’t betting. It is true that you can trade anything with a number and a pulse. It doesn’t matter what thing is behind the number, as long as there is someone else you can play pass the parcel with. But that isn’t investing. When you invest you buy a slice of ownership in a company. You are a business owner. What the business does matters. You don’t have to find someone else to sell it to. The business has a product which it sells. It has the skills and knowledge to recognise a problem someone has, and to solve it. The problem may be someone wants Jam. The problem may be someone needs help making their own Jam. As long as there are problems, and as long as we are human and can’t know everything, there will be value to be created in cooperating. Investing isn’t playing the stock market. You become a part owner in a real company solving real problems. You get your money a real job. It has to work. If it does a good job, then it grows. If it doesn’t, it doesn’t. It grows by solving problem for money and reinvesting that money. There is no magic. It is simply the crystallising of creativity. Good businesses are built to last. Built to adapt, adjust, and accommodate a changing world. 

Self-Made

“Self-Made” implies unplugging from the Matrix. Choosing the red pill. I believe Free Will is possible, it is just incredibly hard. Even then, the self of independent decisions exists within the system. Yogis call the Matrix “Maya” (the illusion of the reality of sensory experience and of the experienced qualities and attributes of oneself). Even if you see the Matrix, you have to start through acceptance. Changing things from where they are. Wealth Compounds. Real wealth comes when the story is bigger than you. When you become a smaller and smaller part of the picture. Through supply chains. Customers. Stakeholders. Through institution building. Articulating and voicing asks and offers. Solving other people’s problems. Through empowering others to make decisions you aren’t even aware of, or don’t have the capacity to understand. Taking the red pill is realising that it is not all about you. That wealth creation is about coordination and releasing potential. Self-Made is an illusion.

Thinking Sustainably

The hardest part of most businesses is finding new clients. Even if you are good at it, there is always the existential risk that there is a limit to the number of people who want what you are offering. Needing new clients isn’t sustainable. Big Game Hunting is also seductively attractive. A single big client can let you think you have seen the matrix, and pop the Champagne. But. There isn’t much big game in a world with an excess of hunters. Hand-to-Mouth living requires a constant, replenishing source. That is why sustainability has to be at the heart of every solution. Now is only worth celebrating in the context of later. We have to eat.  So Hand-to-Mouth is the only first step. Depending on others while you don’t have the necessary skills and knowledge. Depending on yourself when you do. Smoothing and softening that dependence with a Buffer. Building an Engine to detach dependence. Making sure you can comeback. Making sure today provides a platform for tomorrow. Softening the hardest part every day by strengthening and deepening relationships.

Impressive but not Sustainable

Powering Decision Makers

People without money aren’t infants. They don’t need decisions made for them. They need money. Money is the fundamental unit of decision making in a market-based economy. Democracy shouldn’t be about making decisions for other people unless it absolutely has to be. Adding conditions to how people make their basic choices costs money. You have to employ pseudo-parents to question real life adults. To strip them of their agency. People who aren’t in poverty tend to have big ideas about how people in poverty should make their choices. Either from a moral or “quality” perspective. All businesses boil down to problem solving for people with money. Good businesses have direct relationships with decision makers. If you want to solve the problem of poverty, create more decision makers. Then watch how the problems get solved. Spontaneously. From the bottom up.

detail from a drawing

by Leonardo da Vinci