Quiet Art

 The Quiet Art of Leaving it Alone

Most of us start by trading time for money. We work, earn, save, and hope one day to spend what we’ve built. But the real purpose of capital isn’t to be spent. It’s to create a dependable, resilient stream of income that supports you, and ideally, outlives you.

Capital is the goose, not the egg.
It’s money you don’t harass.

The shift from earning to investing requires a psychological unhooking. You have to detach your sense of income and identity from your salary. Capital doesn’t get a monthly paycheque. It doesn’t clock in at 8 and leave at 5. It breathes (sometimes strong, sometimes shallow). That breathing is the rhythm of markets, and learning to live with it is the foundation of long-term wealth.

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Liquidity and the Problem of Forced Selling

When your capital breathes out (when markets fall) the real danger isn’t volatility. It’s being a forced seller.

Forced sales turn temporary paper losses into permanent impairment of capital. If you have to sell assets in a deep drawdown to meet expenses, you lock in losses and shrink your future compounding base. A 50 % drop requires a 100 % recovery just to break even. You’ve broken the flywheel.

Liquidity is the antidote. It’s the availability of cash when you need it, without having to sell long-term assets at the wrong time. Life doesn’t happen in a straight line. Some months cost more than others. Liquidity buys you time. It lets value reassert itself.

That’s why good planning builds buffers (cash and near-cash reserves) that cover short-term needs so that long-term capital can be left alone when it’s under stress.

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Smoothing: Turning Chaos Into Continuity

Markets and life are noisy. The challenge is not to eliminate the bumps, but to smooth them enough that they don’t throw you off course.

Smoothing is about reducing short-term volatility to create the experience of dependability. In investing, that means setting aside reserves in good years to supplement income in bad years. In personal finance, it might mean using cash buffers or conservative drawdown rates so that your lifestyle doesn’t depend directly on market swings.

The idea isn’t new. The earliest insurance contracts were designed to smooth risk across merchants whose ships faced uncertain fates. One ship might sink, another might return laden with treasure, but by pooling together they turned catastrophe into inconvenience.

Smoothing acknowledges that when we live through the same storm, we don’t all have the same boats. The boat matters. It’s what turns capital into a more reliable partner.

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Asset Allocation as Planning, Not Prediction

Most people approach investing as if it’s a race to pick winners (which asset will outperform next year?, which market will surge?). But asset allocation shouldn’t be a guessing game. It’s a planning decision, not a timing decision.

Each asset behaves differently, and understanding those behaviours helps you design around your needs.

• Cash is the most liquid. It earns little, but it’s stable. Perfect for near-term expenses and psychological comfort.
• Fixed income gives your money a salary. You lend capital to others and earn predictable returns in exchange for giving up flexibility.
• Equities represent ownership. They can provide dividends (which is a management smoothed payment for allowing your capital to be put to work) but most of the reward comes from long-term capital growth. That growth depends on what buyers and sellers agree in the future, which can be volatile.

Your personal rhythm (your spending patterns, beliefs, risk tolerance, and emotional capacity for uncertainty) should drive the mix between these assets. Get as much money a job as you, honestly and responsibly, can.

A good plan doesn’t rely on guessing when markets will turn. It ensures you can survive and even thrive through all the turns they take.

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Drawdowns and the Emotional Cost of Compounding

Every long-term investor experiences drawdowns. Those periods when the value of your portfolio falls from its peak. They are the emotional tuition fee you pay for compounding.

A 10 % drawdown feels uncomfortable. A 30 % one can feel existential. But it’s the same underlying truth: prices fluctuate more than values do.

Drawdowns only become dangerous when they trigger emotional or financial panic. When there is nothing to hold on to, and a bias to do something. The investor who sells at the bottom cements the loss and often misses the recovery. The professional who must liquidate because of leverage or margin calls loses not only capital, but the right to compound from a stronger base.

The antidote is preparation. Holding enough liquidity, diversification, and humility to withstand the cycles. Managing your expectations and knowing what you have bought. You can’t control the markets, but you can control your exposure to being forced out of them.

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Risk Cover and the Cost of Being Mortal

There’s another kind of forced sale we rarely acknowledge… the one life forces on us through illness, death, or disability.

Risk cover exists to prevent those events from derailing your capital plan. Insurance, in its truest form, is collective smoothing. You pay a small amount so that, if disaster strikes, you don’t have to liquidate assets or burden others.

For a household, life cover, income protection, and medical insurance are the equivalents of liquidity buffers. They protect your compounding engine from being interrupted. They ensure your capital isn’t sold off in distress, or that your dependants aren’t forced to.

It’s tempting to see insurance as a drag. Money spent on something you hope never to use. But it’s really just another expression of stewardship: sharing risk so that no single event wipes out years of progress.

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Mental Accounting and the Psychology of Stewardship

Money isn’t neutral. We give it stories. We separate it into mental accounts. The “holiday fund,” the “retirement pot,” the “emergency stash.” Behavioural economists call this mental accounting.

It’s not all bad. These stories help us manage complexity. A “do-not-touch” capital account can protect us from ourselves. A “spending bucket” helps us live without guilt. But unchecked, mental accounting can lead to contradictions. Hoarding cash while carrying expensive debt or chasing performance in one bucket while ignoring risk in another.

The goal is not to erase mental accounting but to align it with reality.
Think of your money in layers of time and purpose:

• Liquidity layer — cash for now.
• Income layer — investments that pay dependable returns.
• Growth layer — ownership that compounds for the future.

Each serves a role. Together, they create a structure that supports both peace of mind and progress.

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From Survival to Stewardship

Wealth creation starts with survival… earning, saving, and building buffers. But it matures into stewardship. The responsibility to protect and sustain capital so it can keep serving others.

That means learning to live with uncertainty without being ruled by it. It means having liquidity for life’s bumps, smoothing for stability, insurance for the unexpected, and an allocation plan that reflects your real world, not just your return targets.

It also means accepting that markets are noisy, drawdowns are inevitable, and value creation takes time. You don’t get paid for taking risk. You get paid for bearing uncertainty while continuing to add value.

The best investors aren’t fortune tellers. They’re patient architects building futures and designing systems that survive volatility and thrive on patience.

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The Quiet Art of Leaving It Alone

The hardest part of investing isn’t finding ideas or calculating returns. It’s doing nothing when the world demands action.

Capital grows in silence. It needs space to breathe, to compound, to recover. It doesn’t like being harassed.

So build buffers. Plan your allocations around your life, not market cycles. Smooth where you can, insure what you must, and let time do its quiet work.

Because capital that is cared for (not chased, not panicked, not forced) becomes something extraordinary.

It becomes something that releases those with it to think differently.

Money Gets Treated Better Than People

Money often gets treated better than people. A company can rebrand, pivot, acquire, or spin off new divisions. Its capital is fluid. We, by contrast, are much more constrained. To earn, we must pass narrow filters: someone must demand what we do, be willing to pay for it, and others must not be able to do it better or more cheaply.

And one day, our salary will stop. Whether through retirement, illness, job loss, or age, we can no longer rely on being the “active” earner indefinitely. Most of us build our lives around that expectation. Yet the more interesting question is whether we can build capital instead. Capital that pays us rather than the other way around.

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The Dividend Analogy

This is where the salary and dividend comparison becomes powerful. A company's dividend is a flow of cash, intended to be smooth, predictable, and ideally growing. It is a commitment management makes to shareholders. Share prices themselves are volatile, but dividends tend to be steadier.

Warren Buffett once noted that, on average, a stock’s 52-week high and low differ by around 80 percent. He referenced historical data from Value Line, which tracked about 1,700 companies, to illustrate how wildly prices can swing. These swings often happen without much connection to the underlying cash flows. He intentionally frames volatility as opportunity rather than fear.

Robert Shiller’s work reinforces this point with rigor. He showed that stock prices move far more than the discounted value of their underlying dividends would warrant. In other words, market noise, sentiment, and narrative drive swings beyond fundamentals. This is called the excess volatility puzzle. Shiller’s CAPE ratio, which averages inflation-adjusted earnings over 10 years, helps smooth out that noise and show a more grounded valuation metric.

The lesson for individuals is similar. Smoothing matters. Dividends are smoother, salaries (until they stop) are steady, and capital that pays dividends can bridge from one to the other.

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Retirement as a Dividend Machine

Once you stop earning, your capital must transform into your income. In South Africa, many retirees use living annuities, which legally allow you to draw between 2.5 percent and 17.5 percent of your capital each year.

• At 2.5 percent you may preserve or even grow the capital over time.
• At 17.5 percent you run a high risk of depletion unless your life is short or returns are stellar.
• The risk of outliving your money, called longevity risk, becomes very real.

In the United States, the often-cited 4 percent rule suggests that a 4 percent initial withdrawal, adjusted for inflation, gives you a better than even chance of lasting 30 years. That implies having around 25 times your intended annual withdrawal as capital. But many retirees, constrained by their actual savings, end up needing to draw more.

So a practical sustainable drawdown zone for many is roughly 2.5 to 4 percent. Above that line, you begin entering the decumulation phase and accepting trade-offs. Below it, you might preserve capital, but balancing lifestyle and security becomes a delicate art.

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First, Second, Third Generation Wealth

There are three stages of wealth. Capital can transition from active earning to quiet income.

1. First generation: building from scratch, working for every rand.
2. Second generation: capital begins to earn alongside you, and you balance salary and capital income.
3. Third generation: money earns enough that you may draw without exhausting principal, while still allowing growth.

In that third stage, drawing capital feels more like a dividend, a small fraction of a large, compounding base. You can live, grow the base, and detach more fully from the necessity of employment.

That is the destiny many financial plans aim toward: your capital supporting your life, not the other way around.

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Compulsory and Discretionary Savings

Another piece of this puzzle is how you save.

• Compulsory money, for example retirement funds and pension contributions, is often pre-tax, sheltered growth, and restricted access. It is the “forced engine” the system incentivises you to build.
• Discretionary money is after-tax, flexible, and liquid, but taxed on growth and exposed to volatility.

Compulsory savings encourage a long-term mentality because you cannot touch it too early. They act as guardrails against short-termism. Discretionary money gives you optionality but also temptation.

Part of aligning your money to be salary-like is balancing these two. Use the system’s incentives where possible, but make sure your discretionary capital also works hard, fills gaps, and gives breathing room.

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The Emotional Landscape: Identity, Fear, and Over-Frugality

One of the trickiest parts of the decumulation phase is the emotional shift. Most of our identity is tied to doing, producing, being paid. When salary stops, that scaffolding dissolves.

Thinking of money as a dividend machine helps detach identity from income. The Norway sovereign wealth fund offers a metaphor. Originally built on oil revenue, its identity is no longer just oil. It diversified globally and broke free from its original source of wealth. People, in their financial lives, can similarly detach: from “my job is who I am” to “my capital supports my purpose.”

Another emotional risk is under-consumption. People become so scared of running out that they live too tightly. They never enjoy retirement, even though the money is there. The fear that capital will be eaten away becomes a prison.

Thus, planning is not only about avoiding ruin. It is about calibrating ambition, security, and enjoyment. It is about allowing your money to feel like salary, predictable and generative, while still giving you permission to live.

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What You Can Do (Rule of Thumb)

• Aim for 2.5 to 4 percent drawdowns in your planning horizon.
• Use capital multiplied by 25 to 40 as a working target, recognising it is not a guarantee but a frame.
• Treat every bit of cash you do not need as a worker: get your money a job.
• Balance compulsory savings, which provide guardrail capital, with discretionary investments, which provide flexibility, growth, and optionality.
• Think of your identity beyond income. Allow the possibility that your life can outgrow the filters of paid work.
• Accept noise. Let the market fluctuate. Use smoothing, through dividends and stable allocations, to moderate how much of that noise hits your daily life.

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Provocative Question

How salary-like do you need your money to be?

That question is not just for the ultra-wealthy or future retirees. It is for anyone with capital or ambition. It shapes what type of assets you lean into, how much risk you accept, and how you define purpose beyond your paycheck.

Stay Grounded

There’s a big difference between embodied knowledge and surface-level learning. 

Think about how we used to find our way home. You’d either know the route or use a physical map. That’s embodied. Now, with GPS, it does the work for you—you follow the instructions without really learning the route. This is one of the core fears people have about artificial intelligence: Will we be replaced? If something else is making the decisions, what value do you add? 

But I’m not scared of that. Just like I’m not scared of investing. 

I don’t panic that there are a thousand PhDs trading in the markets—because I’m not trying to out-trade them. I’m not a trader. I invest because I believe value is created by companies doing real things: building products, serving customers, solving problems. When I invest, I own a slice of that. I’m not gambling on price movements—I’m backing something real. 

It’s the same with decision-making and Artificial Intelligence. Own a slice of yourself. Be the person in the room. 

When something becomes embodied, it’s because you’ve done it so often it becomes part of you. You don’t have to think about it—it’s second nature. That’s mastery. That’s magic. It lets you move fast, connect dots, and act with intuition. 

It’s like language. Words only have meaning when they’re shared. You and a close friend can say a single word that carries a whole story. That’s relational depth. That’s how embodied learning works—you repeat, you refine, and it sinks in. 

Eventually, it changes how you respond. Your reactions are no longer deliberate—they’re instinctive. That’s the gift of repetition, of depth, of care. 

But here’s the key: Stay embodied. Be aware of the habits you’re forming. Watch what you repeat—because what you repeat becomes who you are. 

Learning something deeply is hard. But now, with the tools we have, it’s more possible than ever. The opportunity is there—if you’re intentional. 

That’s why I don’t panic—about money, or Artificial Intelligence, or being replaced. I get my money a job. I let it work. I stay grounded in relationships. And I focus on what I value. That’s the difference.

Beyond Etch-a-Sketch

Time is the foundation of property rights. If you know that whatever you are going to do is going to get etch-a-sketched, then you rightly will think with a temporary mindset. Live in the now. You can’t trust there will be a tomorrow. 

If you know you have got a plot of family land for the next thousand years, and no one is ever going to take it from you... the connection to that land will run deep. If you feel a connection to your future family, you will be willing to build something where each generation successively acts as custodians. 

That is why really deep, old money, is family wealth. Where you have family constitutions, and succession planning, and even set up family offices that employ lawyers, accountants, investment professionals and others to help with the complexity of support structures. You are training the grandchildren to take the reins of the family one day. There is a connection across time. 

That is very different from someone who plans to consume their money during their life time... no inheritance, no worries! 

Real wealth is built over incredibly long timeframes. Not even necessarily at high rates of return. Slow, stable, reliably positive return that just keeps quietly coming. 

You may worry if the return is too high, because that raises the possibility of an explosion in the other direction.

Grow or Shrink

The value of a business can be zero. Price can join it there. Now or later. Analysts will attempt to calculate their view of the intrinsic value of a business, and then compare it to the price. Value is dynamic, relative, and personal, and so no estimate of intrinsic value is the “correct” price. 

It is possible to get caught in valuation no man’s land. Seduced by a model of what you think reality should be. Seduced by the impenetrable complexity of your perspective, and how smart that makes you feel. 

Instead, calculating intrinsic value is like doing due diligence on a company you plan to work for. It’s not just about the quality of the job offer. It then matters what work gets done. 

Investors with a quality mindset, will seek out businesses at a reasonable price, but what they are really looking for is what is being done. We tend to undervalue the future, and so it is profitable finding companies that sustainably do something of value and reinvest, creating wealth through a process. 

A good idea is not enough. Those investors will very much consider the strength of the balance sheet of these companies, and the container (barriers to entry) in which value is created. Understanding the barriers that allow winners to keep on winning. 

You don’t have to know what is going to happen in the future. If you don’t pay an excessive price, then the focus shifts to the quality of work being done, and the habit of reinvestment. It is not about outperforming others, or even looking at what they are doing. Not gambling. Not chance. 

If a business creates and reinvests, with a resilient container, it will grow. If it consumes capital, it will shrink.

No Man's Land

Flander's Field, Belgium (1919)

Place to Sleep

It is not a mystery why there is not enough affordable housing. We have not built enough houses. There has been a multiple decade-long process of urbanization and population growth. There are not enough houses in the cities. 

More specifically, there are not enough houses close to the quality jobs and quality schools. Houses get smaller. Prices go up. Borrowing is provided to people to buy (if they can prove they have an income to support interest payments) which means more money chasing the same physical buildings. Interest rates are lowered so that borrowers are subsidized, and savers are penalized. 

Those holding cash have a wasting asset, being paid almost nothing for their savings, so that those borrowing that cash can inflate the cost of housing. The idea of borrowing to buy with 30-year paybacks matching our working lives, and tied to earnings, is as natural as breathing. We lend to people who can prove they don’t explicitly need the money. We lend as front loading of work-for-pay income. 

People who have bought property have seen “growth” for such a long time, we collectively think of homes as “safe as houses” investment. We are all forced buyers of somewhere to sleep. Whether we rent or buy. We can see the bricks and mortar. So the cycle continues. If we want to bring down the cost of housing, there need to be more houses. 

That would bring down the price of those with houses as investments.

Sleep

More Jam

There is a constant wrestle between price (a number) and value (qualitative and dynamic). Not everything that has value can be counted, and yet we are trying to build and grow. 

We measure ourselves through change. Often we rely on change to bring awareness of value. Change gives us a sense of direction. Adding contrast. Allowing us to tell ourselves a story. Of the past, and of the future, and how they differ. 

Why does a Jam Factory make money? Because it makes Jam. If you reinvest some of the difference between how much you sold the Jam for, and how much it cost to make, you can make more Jam next year. Expand the factory. Count more jars of Jam. Buy bigger machines. Hire more people. Use more supplies. Then it makes sense if in 20 years time the Jam factory is worth more. It produces countably more Jam. That is fundamental investing. 

What happens with speculation is the same thing has a higher price. Not because of any countable growth. Often just because of supply and demand. The same house may cost more, simply because we are not building enough houses, we are lending people money to buy houses, and more people want houses. 

You cannot treat homes as an “investment”, *and* something you want to become more affordable over time.

Patterns and Work

Trading is sensing the patterns. It is like poker where you are playing against another person. Attempting to go with the momentum when the price is going up, and not be exposed when it is going down. Playing off the rhythms. The natural feast and famine cycle. 

If you have got a sense that there is a long-term, stable price, then you get an understanding of how buyers and sellers move around that. You are juggling supply and demand, and playing both sides. Good or bad, this too will pass. "Buy when the price is low and sell when the price is high". Be a supplier when there is scarcity, and store up when there is abundance. 

You have to have a sense that there is a long-term price, but you don't really care what the thing is. You are making money by playing off the relationship between price and long-term value. 

If you are really brave, you can trade something where the long-term price is zero. Where there is no value, there are just people willing to buy. Until there aren’t. Trading musical chairs. 

With investing, you are not dependent on a buyer of the vehicle until/unless you sell... you are dependent on what work the vehicle does. Trading is about the patterns, investing is about the work.

Natural Rhythms

Building Value

Fundamental investing is the idea that what money does matters. Money is abstract. It is not a thing. It is a tool. It is a way we communicate with each other. Money can get quite confusing, because there can be a lot of smoke and mirrors. 

You can put a price on anything. That is why it is a useful communication tool. Because even if you have completely different worldviews, you have this point of connection that is price. You do not need to understand each other. 

Computers are not sentient, but a string of ones and zeros can convey information that can lead to action. The computers do not understand the ones and zeros, but they know what to do. 

Price is similar. Price itself literally does not care. It is a tool between two people who (may) care very much. All a price must do, is be a catalyst for exchange. 

There is a difference between trading and investing. Trading can be speculative. If a price has a pulse, you can trade it. It doesn't actually matter what is underneath. 

Investing does care what the thing is. It is not just about the price. You are not just trying to outperform. Your performance is not relative to other people. With investing it matters that you are creating something of value. 

Investing is putting money to work to build value.

"Women Mending Nets" Van Gogh

Waves of Life

The vast majority of people, even those earning a lot of money, live hand-to-mouth. One way to view meritocracy is that it shifts capital to where it is working the hardest. Another way to view meritocracy is that people who are "better", deserve to live better lives. That how much you spend should be in line with how much value you add to society. For that to be “true”, people need to spend what they earn, and be paid what they are worth. That is not how capital, money, or price works. 

One of the challenges of building capital is that there are always emergencies. There are always events that can stop you and set you back to zero and hand-to-mouth. 

In Australia, they have famously changed national saving habits and built huge superannuation funds. One of the philosophical questions is whether people should be able to access their retirement savings in emergencies. For proponents of Universal Basic Income, a key question stands around whether lenders should have a claim over those payments. Can you borrow against that guaranteed stream of money?

In the early stages of building capital, the waves of life can destroy any capacity to protect, cultivate, and invest in merit. It is hard to grow capital when it is being harassed. It is hard to see each other when we are living hand-to-mouth. 

Doubling Time

Part of the story I tell myself about money comes from the micro-world I grew up in. The bubble within a bubble where my parents were the decision makers. One of the ways I was taught saving was that my parents used to match what I saved. How do you instill the concept of compound interest, and delaying getting something now, so that it can build for later? Saving and Investing are worth thinking of as different things. You save *for* something. Investing puts money to work (reinvesting rather than consumption). You can then spend some of what the investment earns, and reinvest some. But it is hard enough learning delayed gratification by saving, so... baby steps. Compound interest also takes time to kick in. 5% real return would double your money in roughly “rule of 70” 14 years (70 divided by return equals roughly the doubling time). No kid is still a kid if they have to wait that long. The big thing I wanted was a music system. I saved half by starting a sweet business, and my Mom matched what I saved. Where she got the magic “compound interest”, I don’t know. But she managed. She was a bit of a hero.

Funny Faces sold individually were my biggest winner

Solved Problem

Investing is a solved problem. As Seth Klarman points out, “the real secret to investing is that there is no secret to investing”. The unsolved problem is that most people don’t do it. Most people still live hand-to-mouth. A lot of people are stuck in debt traps which is “reverse investing”. Like the underworld of Stranger Things, you work to pay for past consumption or misfortune. Three key factors in investing are (1) competence, (2) relationships, and (3) beliefs. I don’t believe in Gods of investing. I do look out for red competence flags. You have to do your due diligence. Like romantic relationships – we form connections with people. The grass isn’t always greener. Improving our investing habits starts where we are. Our beliefs are path dependent. There is an element of this in the “how” of investing. You have to choose a path that resonates for you so you can stick to it. The basics are pretty simple. Find a way to earn. Spend less than you earn. Get the difference a job. 

too many live hand-to-mouth

 

I am not Playing

I don’t like the term “playing the markets”, but even I have to admit that it is possible to hype it up and play it as a game. Throw in some American Football Style commentary and every bump and drop can be dramatized. It is true that you can trade anything with a pulse. It is also true, that while some people believe it is 50/50 whether an active investor making conscious decisions can beat the market (pre fees), it is far far easier to lose money than it is to make money. It is incredibly easy to make stupid decisions and lose money fast. The equivalent of going on tilt in poker. Which normally means trying too hard to make money too fast. That is “playing the markets”. The best way to play that game is to be patient, and avoid being stupid. Feed off the mistakes of others. Investing is different. Investing is slow. Investing is getting your money a job, and reinvesting its salary rather than spending it. Investing is the win-win daily practice of creating mutually positive futures. Investing is channeling resources to the solving of problems.

Investing isn't Win-Lose

Hubris Factory

“The real secret to investing is that there is no secret to investing. Every important element of value investing has been made available to the public many times over, beginning in 1934 with the first edition of Security Analysis.” Investing is enticingly easy to monetise. You get cost centres (need money) and profit centres (make money). A good business is one where you have something that is easy to count and communicate. “I’ll grow your money” fits the bill. Pricing is also easy with, “I’ll take a percentage”. The two key elements are good capital allocation (what work the money does) and reversion to mean (prices typically overreact and true normal is less noisy). The downside of all this simplicity is that investing is a hubris factory. The real work gets done by the underlying businesses, but investors often think it is an extension of classroom exam results (which also oversimplify the process of ranking people). An Investor’s entire career of being a rock star can come tumbling down with factual evidence that they have done no better than average. They’ internalise the good times and excuse the bad. The real secret of investing and good businesses is that it is not about you. It is about putting money to work, and reinvesting. Custodianship, not proof of worth.

Thriving Too

I view investing as getting my money a job. When things are complicated, we simplify them into stories (based on what we already understand) to make sense of it all. To provide a way to make decisions. I started by investing in the funds that I was studying. Which, unsurprisingly, were the funds of the companies I worked at. Which, unsurprisingly, were companies that recognised the qualifications and studies I had done. Then I got an Interactive Brokers account, and started by getting my money four jobs. Gradually over a couple of years, I got my money more jobs until I had a portfolio of 20. Unlike my current personal job hunt, my money did not get interviewed. It did not have to find vacancies in roles that fit my profile. Money does not specialise. Money does not make decisions that limit its world view. Money does not have confirmation bias that looks to explain away its inadequacies in comfortable, but false, fairy tales. Money does not define itself by the work it does. It works, and either it grows or shrinks. The secret of nature, David Attenborough says, is that “a species can only thrive when everything around it thrives too”. Making money is not a win-lose ego competition. It is win-win capital allocation.

Rain Forest

Full of  Sustainable Growth

Honest Pitch

Investing is a lot like dieting or exercise. It is not a secret how to do it well. The difficult bit is doing it consistently. With a little bit of studying and a broker account, a huge investment house with a massive investment team has no advantage over you whatsoever (unless you are a trader). There are no gods of investing. There is a lot of smoke and mirrors used to create the impression that there are. And to keep underconfident overachievers self-doubting and working for others. The cold truth is that most investors make the big money, not by investing, but by investing for others. The competitive advantage is not the skills and knowledge. It is the capital, and the container. The ability to survive noise, and maintain the barriers to entry that stop new competitors. The honest pitch is, “I like investing. Please can I do it for you, for a fee.”

Messy Decisions

One huge advantage of being an Investment Analyst is yogic sage level detachment. You pass judgement on the value of a business, but active investors are still not activist investors. They stand apart. Management, customers, suppliers, competitors etc. need not even be aware of the investor’s existence. I remember one young (at the time) analyst moaning about what he was supposed to do with the next five years. The time it would take to get a sense if 50-60% of his decisions were “correct”. Like a dentist can fix a tooth in a couple of minutes, or take hours just for the sake of it, the main “job” of active investors isn’t the investment, it is the business of raising capital to invest. One huge disadvantage of being an Investment Analyst, is thinking you can make the same detached decisions in the real world. The real world has momentum and morale. Decisions do impact other people. Changing track has a real cost. There is no such thing as an independent decision. We must engage in the messy interplay of coordinating with other real people who see differently, want differently, and do differently.

Muddied Decisions

Make Choices

I am making it up as I go along. If I sound confident in the way I write, it is because I like editing out wiggle words like “I think”, “for me”, and “in my opinion”. Everyone else is making it up as they go along too. There are no adults. There is a lot of noise, and most of what we know is path dependent. The right book, experience, or person at the right time twists the world on its head.  My interest in money stems from a dislike of the control it has over me. My choice of profession was based on a path that bumped into the expense of London, born in a world of Apartheid where your containers determine your opportunity. Actuarial Science seemed like a safe container to at least have enough to not be owned by money. Then I got into the world of investments because the competitive South African in me wanted to prove myself. Now I see myself as a Derren Brown of Active Investing. There are no Gods of investing. You can learn if you want. It is not magic. An active investor who doesn’t believe in the magic. Make conscious choices. Life will then decide your next choice. Make that.

Preparation and Noise

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.

Choices have Consequences

I studied money partly because I hated it. Not money itself, because money isn’t a thing. Money is a communication tool. Mostly I hated the unchosen constraints and impact on relationships. Money fights. Money anxiety. Money in the driving seat. There are various stories of Alexander the Great coming across a Yogi on a rock. One trying to conquer, one working on acceptance. Life is about choices, and choices have consequences. Not all good ideas are good business ideas. Personally, I would rather focus my energy on the good ideas that are terrible business ideas. But this reality dictates that we at least have to tip our hats to the world of supply and demand. Where price isn’t value, but a sorting mechanism shifting things you can count and control. If you learn to understand risk, planning, and investment, you can gradually still the waves and choose your constraints. Conscious of the consequences, but with a point of focus.

Map of Alexander's Empire and Route