Wound Up

Numbers are blunt tools for communication. The message they convey is more important to us than the countable thing they are supposed to represent. How a number is heard, interpreted, and felt, can wind us up. How they relate to ranking criteria or how we are judged. 

Key performance indicators to measure us. Seeing what you have done. Seeing what you haven’t done. How the environment has changed. Have you put sufficient effort in? 

Has effort resulted in output? How clever are you? Should you be given more responsibility? Should you be given coaching/mentoring/the boot? All the various ways we use to decide if someone is good enough. 

It is always interesting to see how this is connected to the broader questions, and the broader community. Many problems are solved in complex groups. Wealth creation is a team sport. Attributing who did what, and ranking those contributions, can be an impossible task. One that pretends that contribution = value = reward. 

If you look at the long-term growth of countries' “gross domestic product”, it exploded with the industrial revolution. Newtonesque jumping on the shoulders of giants. 

We tend to look at meritocracy as the marginal contribution of the individual (“if they hadn’t been there”) rather than the hard Tim Minchin truth that “If I didn't have you, someone else would do”. 

Accepting that we are inherently replaceable *in the world of money*. People will miss you, but someone else will do the job. Don’t get wound up the numbers. They don’t represent you.

Losing Focus

There is a conflict between the idea of “leave your ego at the door” and meritocracy. If we believe in a world where the quality of life you can live is determined by your “underlying permanent” skill and knowledge, then constant evaluation of an individual’s fundamental intrinsic worth makes sense. If you believe in Elite teams, then you need to be regularly dividing people into groups that are good enough, and not good enough. The justification for meritocracy is that all boats rise if resources are pushed to those who are the best. Not for spending. For reinvestment. Politics is bound to be brutal and closeted if you pretend to be gods. Ego gets left at the door when it is all hands on deck to find solutions. When someone is confident enough about their place that the focus is on the problems, not the person. If you are surrounded by naked emperors, the focus is likely to be on, smaller things.

Graffiti in Tartu

Holding the Knife

Price is not value. Salary is not worth. The best way to see this is to speak to someone who has moved from a big company to a small company. Especially if that small company is a start-up. The layer of story-telling that gets added onto a business to do salary negotiations is simply that. A story. The magic of markets are they let us quantify things that cannot be quantified. If you have someone who wants something (because they think it is worth more than the price) and someone who has that thing to offer (because they can supply it at sufficiently less than the price). Price is just an agreement. In most businesses price determines the size of the pie. Then story gets added and sliced by the person with the knife. If the company has a stable cash flow that allows the illusion of sticky wages (annual increases in only one direction), then people can live in the false security of salaries that reward seniority and perceived merit. Key performance indicators are a tool for those who hold the knife. They are not a market price.

Diving to Understand

Merit is only one factor in wealth creation. Like risk and return, it is also not something you can simply reduce to a number for comparison and ranking. Like risk and return, it should come with the standard regulatory disclosure, “past performance is no guarantee of future success”. To “see Merit”, you need to look. What we see, unfortunately, depends on what we have seen. We understand by deep soaking. Through repetition, context, and recognition. Through networks of connecting dots that build a picture we can make sense of. To see Merit, you need to do more than just superficial due diligence. You need to repeatedly ask questions about people, process, performance, philosophy, and what it means for you. Merit means nothing without a win-win relationship between the one that has merit, and those they interact with. To see merit, you need to do a deep dive due diligence, and we only have limited capacity to do that. Which means what we see is path dependent, and we often see what we want to see. Looking to confirm that we are on the right path. What we see is not all there is.

"My Octopus Teacher"

Diving to Understand

Island in a Bubble

The two main ways of measuring investment returns are called “Time-Weighted” and “Money-Weighted”. Time-Weighted could be called the play-play-meritocracy measure. It eliminates the distortion of money coming in, and going out, and looks at the performance of the investor as if they lived on an island in a bubble. This lets you compare the results of a decision-maker with a billion dollars to one with 10,000 dollars. What matters is the Money-Weighted measure. If you do well, when you have no money, and badly, when you have lots of money… it matters. When we talk of meritocracy, we normally mean the quality of skills and knowledge. That is not the full picture. You need money to make money. To survive. To invest. To have enough to reinvest rather than consume, and compound. Hand-to-mouth living leaves no space for escape or growth. You then need a container to make the money in. Barriers to entry. A door that opens for you, but not others. Even if your time-weighted return screams average. If you believe in your merit, you do not need to live on an island. And can invest in the bigger container that includes others. Beware those wracked with self-doubt who project that doubt on others through judgment.

Frosted Bubble

The Darkness

The challenge we face with politics is that we want it. The most political people I know use phrases like “leave your ego at the door”, and ask “how do we get rid of the politics?” without a hint of irony. The darkness from lack of transparency protects our interests and vulnerabilities. We like positioning ourselves against other people, if we come out on top. We like the sense of superiority. We like getting better. We like progress. We like being incentivised. We like action. We like feeling like we are doing something right, and moving forward.

We create these hierarchies as a way of making sense of the world. As a way of feeling like we are moving. Feeling a sense of life. It is an easy option to measure the world. Money is like salt, fat, and sugar for the taste buds. It is not subtle flavouring.

Not Good Enough

When the default is to work full-time for one company, that becomes the container into which we direct most of our energy. I think you get a maximum 4-6 hours a day of really good quality creativity. Where you dig deep into the unique path that has led you to where you are, and connect interesting dots of the paths that have led everyone else to you. The values of the container matter. Lots of businesses, communities and containers discuss “Values” to create an inspirational glue for team members. Often it is platitudes like Excellence and Accountability. That can be a hubris factory. Creating, and sustaining, the idea that those in the container are better than those outside the container. Schadenfreude in the failure of others, and a lack of genuine self-reflection as you defend the illusion of superiority. It is dangerous to categorise others into “good enough” and “not good enough”. We seldom have a complete picture of the story of others. The ability to see them. Relative thinking and comparison is often just a reflection of the voices in the heads of those doing the judging. The voices telling them they, themselves, are not good enough.

Self-Contained

The Gods Envy Us

One of the challenges with investing is when to admit you were wrong. If your goal as a stock picker is to do better than just investing blindly in everything on offer (an index). History is, at least, compelling enough to know that outperforming in 60% of your decisions will raise you to the status of demigod if people give you the credit. But if you underperform more than 50% of the time? If you underperform the benchmark over an extended period? How long is long enough to take the blame? Performance is noisy, which gives lots of space to hide. Going to Zero ends the discussion, but lots of companies stutter along. Max Plank reminds us that Science progresses one funeral at a time. Death is a feature, not a glitch. So how do we know when it is time to let go of beliefs? How do we ensure that we are not so tied to our stories, that we serve them, rather than them serving us? How do you maintain a sell discipline?

"They envy us because we're mortal, because any moment may be our last. Everything is more beautiful because we're doomed."

Waves of What If

“Win-Win” was the biggest insight Adam Smith offered the world. With central decision makers trapped in Nation State gun boat diplomacy, and global pissing contests between birth-based containers competitively colonising the world… he suggested a different course. His bold idea was that people were best placed to make their own decisions, and that when two people agreed on an exchange with full transparency… both won. Agreement building. Trade. Generous problem solving. The problem with Zero-Sum thinking is you are wishing ill on your competitors. Things you don’t do become haunting waves of what if. Letting go of and wishing well alternative histories, paths, choices, and options allows you to focus simply on the problems you are working on. Not on the way you will be judged. It allows you to genuinely celebrate other people’s success, rather than seeing it as confirmation of your inadequacy.

Alternative Histories

Biggest Slice

Once you let go of the illusion that price is value, anxiety disappears from selling the pie. If people want pie, and you can get it made at the price offered… it happens. The problem remains in slicing the money after selling the pie. We still live under the illusion that you can attribute everything. That you can say who added the value. That you can say who deserves the biggest slice. We still claim that people are paid based on their value add. They aren’t. It is a combination of politics and power that splits the pie. Containers and Capital. People with barriers. People with capacity. In the absence of markets that simply respond (without barriers) to supply and demand. You can’t count everything that counts. As soon as it isn’t a market and there are barriers… it isn’t a meritocracy. It’s a story.

Home Workshop

I stepped away from the Corporate world in August 2014. I liked the idea of living off an Engine of Capital where my decisions of how to spend my time were no longer filtered by the purpose of my full-time employers. A world free of job hunts, bosses, career progression, office politics, and performance reviews. A chance to internalise and control my own self-reflection and appetite for feedback. I particularly like being my own decision maker. Not having to make proposals for how things should be done to boards or decision makers higher up the tree. Not having to justify or get permission. Making decisions myself. My Engine isn’t big, and it wobbles. I live with a cloud of existential anxiety and my elbows covered in grease doing repairs in my home garage. I live on significantly less than I would if I just got a job. A different sort of stress to the 9-5 of accepting the way the world works. I am making it up as I go along. I think we all are. Even stepping away had its own new set of constraints and pressures. You can’t escape the madness. You can just invest in your ability to cope.

My Grandfather in his home workshop in Nov 2014

Degrading Categories

I hate feeling incompetent. Almost as much as I hate the feeling of having gotten it wrong by someone. In a way that I can’t correct. Intellectually I get the idea of the importance of not caring what other people think. But I do care. And people, all people, have limits to their skills and knowledge. Money lets you hide it somewhat. You can pay people to do the things you can’t do. You can even convince yourself that that is because your time is worth more than theirs. That the thing you specialise in is more important than the thing they do. Particularly if it pays more. So, paying them to do the thing you can’t do is protecting your time. You can even convince yourself that you could do the thing they do, if you chose to. Underlying a lot of problematic prejudice is a fundamental belief in superiority. Dividing people into binary categories of “good enough” and “not good enough”. Second class citizens. Surrounding yourself with people you feel are good enough. Not doing the work to see the others. Underlying that is probably the internal voice telling you you aren’t good enough. The voice that is secretly aware of all the things you can’t do.

Cotton Wool Focus

Tacit Knowledge is understanding we have that we are unable to write down or verbalise. Embodied knowledge. Relational knowledge. It is information that is only available to those who do the work themselves. It can’t be communicated to managers. Being good at something isn’t the same thing as knowing why you are good at something. Often, we end up attributing the “merit” to anything that is easy to count. Even if we acknowledge that there is so much noise that the numbers need to be treated carefully (this excuse is normally used when the numbers are bad). As organisations get bigger, you can get a separation between the clients and where management think the value is added. The intention is good. Cotton wool focus. In reality, a direct relationship with the client is the value added. Every layer is a distraction. Every layer loses focus. Otherwise client facing staff simply become a shield for bad performance.

Uncontrollable

I have always envied Hole Diggers. Someone whose job it is to dig 6 holes. They dig 8, drop the mic, and leave work early. The ask and offer is incredibly clear. I used to love Maths at school. Yes, Mrs Chick used to tease me about going via Cape Town to a solution, but it was either right or wrong. And she could show me the short cuts. Mr Lichkus and I would go head to head in epic battles in the Art Room. I had to lean into chaos. I once let my classmates have an hour to do whatever they wanted to my piece. Flames and burnt plastic followed. As I coughed and sneezed black stuff from my nose during the next period in English class (similarly ambiguous), I did have a break through on reflection. Much harder won. In the Investment world people pretend it’s maths. That their track record points to their success. Except when that track record disappears. Then it is church, or art class, or English. Anything with wiggle room. Ambiguity provides space for BS. It also provides space for beauty. In the eye of the beholder, and in the control of the beholden.

Fire and Earth

Your Head

I am a big believer in Institution Building. One of the reasons for the stretching of the pay scale from those on the bottom to the top is that human excellence gets institutionalised. Those at the bottom are paid their cog value (how much it would cost to replace them). Those at the top divide up what is created. I am a Yoga Teacher. In training, and under supervision, I was often reminded not to let students experience of Yoga go to my head. If they love the class, they may give me all the credit. It’s not me. It’s the Yoga. Yes, I played a role. The same is true in big institutions. Decision makers at the top will credit themselves with the full “marginal impact” of their actions. They will justify huge salaries as meritocracy. “What would have happened if I hadn’t done that?”. What they don’t do is say, “What would have happened if the Institution wasn’t behind me?”. We build on what came before. We build together. Every single individual is replaceable if you are thinking in transactional terms.

Productive Performance

The deal most of us have is that we work to survive. Some of us get to do work that fulfils a deeper purpose than that, and some of us enjoy the benefits of paid work we really connect with. Most of us have to deal with being productive assets. Life as a job description. The first insurance I bought when I started working (my first post studies job was in Risk Product Development) was Disability Cover, Severe Illness Cover, and Future Cover (the ability to get cover I hadn’t thought of without medical tests). All these protected my ability to earn an income. If I was still alive, but was no longer “a productive asset”. I kept this cover until my Engine was bigger than the amount I would get if something went wrong. Part of my decision to stop working for money in 2014 was a distaste at being a productive asset. At being weighed, measured, and paid. Capital is far better suited to paid work than people. Not everything that counts can be counted. The biggest strength of Capital is empowering people to choose the nature of work that they do. Perhaps work that can’t be simplified into performance measures.

Laying Groundwork

One objection to Capital is that the owners aren’t doing the work. There is a moral feeling that the people involved should be the people being rewarded. It’s complicated. Reward and input don’t go hand-in-hand. The feedback isn’t instant or clear. Often there is a substantial delay. If you look at an ultra-long-term growth chart of GDP in the UK, you will see that a lot of the value “has been added recently”. Rubbish. The majority of value gets added in laying the foundations. The dirty, unglamorous, upfront work. Like in Rugby. The match is won by the forwards, and the backs determine the scoreline. “Meritocracy” tends to financially reward the last decision maker in a binary, “what would it have looked like without this decision” way. That is lazy attribution. Capital allows owners to do the dirty work knowing they will benefit even if they walk away when different skills are required. Or they get tired and lose sufficient inspiration to overcome the attached nonsense. The challenge is hereditary entitlement. The balance between passing on unearned wealth, and recognising that most of the groundwork for today’s Merit has been layed over the 50,000 to 2 million years since we started speaking to each other. Community Wealth.