Inhale and Exhale

Stilling the waves of money anxiety starts with understanding where you are. Like meditation, thoughts will continue to come through your head. It is not a fight. You do not do meditation well or badly. There are no rankings or elimination rounds. When a thought comes into your head, it is the point to acknowledge it. Greet it. Politely let it pass. Then go back to your breathing. Financial Security is also about the inhalation (income) and exhalation (spending), and the relationship between the two. You want to breathe in slowly, and with control, and breathe out slowly, and with control. Spending has fixed parts and variable parts. If you keep a record, you can see some patterns. Even the variable parts have regular highs and lows. You can get a sense of the lung capacity needed. There will still be shocks, when spending is way higher than normal. For that, you need a buffer or support. To build that, always starts in the same place, for everyone. Where they are. Where you are. With a breath, and understanding where you are, is. So you can let it pass.

Building Lung Capacity

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.

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.

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)

Free Rider

An Engine is Capital that can earn money on your behalf, so that you can focus on value that is hard to monetise. Income is the lazy man’s way of comparing the incomparable. We don’t have the capacity to understand each other’s worlds without concerted effort. We are mostly too busy on our own stuff to try. We don’t appreciate Free Riders and Lazy Eaters. The base assumption is if you aren’t earning coin, you are leeching. It is a terrible assumption. A symptom of our societal obsession with weighing and measuring each other, rather than seeing the person. Not all ideas are good business ideas. Not all business ideas are good ideas. Most of my time is spent on things that don’t make money, because I “front loaded” my earning. I didn’t spend it all, but instead got it a job. It still earns money. That enables me to do unpaid work. To explore. To get lost in the grass. To appear lost, because I don’t have a big pay-check to print on my shirt. I don’t have a boss to justify myself to. I am cool with that. The world mostly isn’t.

Free to Wonder

Big and Fragile

The size of your work income doesn’t determine your financial security. You can earn £10,000 a month in London and be more fragile than someone spending R4,000 (about £175) a month in rural South Africa (an estimate of the living wage for an individual). Work Income is fragile. Ask 2020. Hand-to-mouth living doesn’t work if the hands are tied. A Pass-the-Parcel economy doesn’t work if the music stops playing. A work income is usually the initial source of financial security. But what you do with it matters. The key is what you spend. Price indicates scarcity, not value. So if you want to maximise value, be a Cultural Billionaire. Spend on things everyone can afford. Democratic goods. Build a Buffer/Emergency Fund that covers 3-6 months of expenses (for the unexpected). Invest in an Engine that earns an income independent of your hands. Invest in your Community. Be wary of committing to fixed expenses that keep knocking at the door when you are at home because the work has gone. Your financial security is determined by your ability to endure and capacity to cope. Strong and flexible provides the foundation for creativity, learning, and building a meaningful life. Autonomy matters, not size.

Osmar Schindler (1888)

Wiggle Room

You are not your job. Your income doesn’t determine your quality of life. Your success is not signaled by how much you consume. We are not cogs to fill specific and managed roles defined by a path we set out on as kids. You can love languages as an adult when you hated Afrikaans as a kid. You can discover a passion for Music late in life. Coding. Investing. Running. Whatever. You can unlearn. You can relearn. You can reflect on who you are, and who you want to be. Free Will exists. It’s just hard. Detaching from your circumstances starts with wiggle room. If you live hand-to-mouth then there is no breathing space for change. We have the most control over our mouths. Our consumption. If you can let go of signaling to others your place in society, you can gain control over your choices. Slowly. Over time. With work. Emergencies often make our choices for us. Build an Emergency Fund. Space between your hand and mouth. 3-6 months of spending requirements. Then look up. Look properly. And make a choice.

Space to Wiggle

At the Centre

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

Schroedinger's Cash

Snapping Hand-to-Mouth income dependence requires stepping away from the edge. This is difficult, because the views are best when we push out as far as we can. Savings and Investment come in very different flavours. Two of them are “there, but not there”. That requires taming your inner toddler. A Buffer is an Emergency Fund of 3-6 months’ worth of expenses. Cash that is in your account, but not for normal spending. It is there for smoothing. When unexpected expenses arise, or income disappears unexpectedly. Any spending requires balancing repair work. An Engine is a source of passive income. Powering a stream of income that lessens the burden on your hands. But you can’t spend the Engine. The Engine is working. Spending your Engine is firing it. You can spend some of what the Engine produces. If you spend less than it produces, it will grow. The third type of Savings & Investment is easier. Saving *for* something. You can visualise the reward. Stepping away from the edge requires developing the ability to value what you can’t see.

There, but not there