Staying Fed

Building communities is hard. An advantage of being conservative is that there is someone to tell you the way things are done. If you are making allowances for people moving between, in, out, and through... and bringing themselves with, and leaving their mark... the complexity spirals. 

Capital is a conspicuous form of privilege. We want to be able to see individuals rather than judging people based on prejudices and historical skills. This means we need new tools for coordination and consensus building beyond “looking after your own”. 

The capital needed to reduce the impact of financial waves if made by solving clearly articulated problems for decision-makers with money. That is done by developing the skills and knowledge to solve that kind of problem. 

You need containers for capital. Containers have barriers to entry and barriers to exit. You want to reduce those barriers with faith that you are creating a bigger container in which everyone can succeed. The four freedoms of movement of capital, goods, services, and labour create a flow that benefit all as problems are solved. 

We need to reduce the fear that prevents others from solving problems because we need to be the one to solve the problem to get paid. If you are secure in your underlying income, you can stop grabbing at problems to perpetuate them to keep yourself fed.

Kuiering v Pricing

Stillness can come not through the absence of thought, but through a point of focused engagement. 

I am at my happiest when I am absorbed in a deep and meaningful conversation with someone. My favourite word is Kuier. It doesn’t have a direct translation, but I interpret it as a warm spending of time. There is catch-up. There is content. There may be wine. 

Yet the point of focus is really an appreciation of the other human being rather than being defined by another goal. An attempt to see each other. Like the wonderful greeting... Sawubona... I see you. 

I get into a state of flow by diving into learning things. When I feel a sense of meaning soaking in as I chip away at complexity. Flashes of insight before I get swallowed once again by confusion and doubt. Wondering in the grass rather than lost. Stumbling. Grappling. Connecting. 

Everyone finds flow in a different place. Which is why relationships are one of the essential basics to come back to. To invest in. To make yourself available to people. Partly so that when you need them there is pre-loaded reciprocity. We can tell if someone is interested in us simply because they want something now. 

Part of Kuiering is a lack of urgency. Part of pricing is manufactured discontent and immediacy. Kuiering is comfortable where it is. Pricing creates a feeling of wanting to be somewhere else. Kuiering releases expectation. It notices. Pricing creates expectation. It contrasts. Kuiering needs a person. Pricing needs a problem. 

I am lucky to have a wide circle of friends. I find each of them is able to see me in a slightly different way. I understand, and see, and kuier with, myself better through those relationships.

No better place to be

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

Multiple Paths

Yoga has multiple paths. Yogi philosophers describe four. Karma Yoga is the path of action. Bhakti Yoga is the path of love/worship/music/art. Raja Yoga is direct meditation, and internal reflection on the workings of the mind. Jnana Yoga, takes the approach of study and knowledge. Attempting to understand how other people have looked at the world, contemplating, looking for patterns, learning, communicating, and simplifying. 

Yoga isn't only done on a mat. You can use all four paths or focus on one. Despite the same destination, the path is something you choose for yourself. Choice through becoming aware of what works for you, from where you are. Choice through iteration. Through trial and error. Through micro-ambition. Small, achievable goals that add up. An ounce of practice, followed by another ounce. Creating a loop that engages you. 

The concept of flow is meditative. You are fully engaged because your particular skills and knowledge match the challenge in a way that fully engages you. You are neither anxious because your ability is stretched beyond capacity, nor bored because not all of your attention is on your point of focus. 

The ideal is to build a daily practice that allows you to engage and create meaning in a way that resonates with your intention. 

Releasing the control of temporary problems and waves of anxiety does require a certain amount of attention. They go away if and when you deal with them. 

The key is to create a level of separation from the problem. “You are not the problem, the problem is the problem.”

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

Lightly Held

With lightly held detachment, you still care deeply and are involved, but you carry the sense that “this too will pass”. A single event/ project/ outcome does not define you. You are making a contribution to something that exists outside you. 

There can come a point where you can detach completely. A form of “earned selfishness”. Handing over when your individual part of the story is over and you are able to extract yourself. That is a very yogic approach. 

The yogis talk of life stages called ashramas. The four ashramas are: Brahmacharya (student), Grihastha (householder), Vanaprastha (retired) and Sannyasa (renunciate). At the end, you are connecting more deeply with the permanent part of who we are, when your temporary role has run its course. 

Detachment still allows you to be ambitious, in a micro-ambitious way. Small achieveable goals that add up. Capacity for small projects that you can wrap your head around. That is why we break things down into stories and categories that connect to how we understand. Little problems we can fix and move on to the next little problem. 

The more nimble you are, the more able you are. To adapt and adjust and accommodate the new problems and information that come in. 

Risk and Return

I had failed stuff before, but not academic stuff. When I got to University, I was left dazed and confused on several occasions. Sometimes for time pressure reasons and the sheer volume of work to get through. I was made to fully realise the limits of my academic ability. My mantra getting through was, “This is not Rocket Science. You are not pushing the boundaries of human thought. Other people have done this before.” One idea that I found really problematic coming out of the maths of finance was the oversimplifying of risk to volatility. Volatility is quantifiable. It is how much the average observation, differs from the average of the observations. So, if you know the average, how far “on average” will one of the parts be away from that. It is appealing if you can count something. If you want to believe in a world where you can clearly say return simplifies down to a number, and risk simplifies to a number. Then you can adjust return for risk. Take the level of risk appropriate for your appetite, and you choose the option at that level with the highest reward. Now, that seems beautifully simple. It is just wrong. You don’t get paid for taking risk. You get paid for value added. You don’t get paid for complexity, you get paid for solving things. You don’t get paid for not failing. You get paid for getting to a solution.

 

Source of Power

The reason I talk of “building an Engine” rather than saving/investing/capital is because I am a fundamental investor. I believe what you do matters. Wealth creation is not a win-lose tussle to prove how clever you are. It benefits you if others also succeed. I believe long term wealth is created by solving problems for the whole value delivery chain. “A species can only thrive when everything else around it thrives too” points out David Attenborough. It is not an accident that it is easier to make money in rich countries, or if you are randomly born into a rich community. An Engine powers things that don’t necessarily power themselves. Not all good ideas are good business ideas. Equally, some great ideas only happen if they find the money. If they have an Engine. To power good ideas, Engines need to work. Building Engines can set your good ideas free, beyond the narrow constraints of supply and demand that contain money making ideas.

Source of Power

 

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

 

Fear of Success

Money is made by solving problems in containers for people with money. The key is being able to communicate with the decision-maker-with-money, in language they understand. Know who is paying. Know what they want. Know what success looks like to them.

Neville Scott has spent a career helping business leaders design solutions to problems that can be implemented. He starts his process by understanding “the School Playground”. Problems have deep histories with complex origins. Solutions to single problems have unintended consequences and layers. One problem we are all trying to solve is that we need to eat. We have to get paid. If we permanently solve the problem we get paid to solve, that can be a problem. Creative destruction is a powerful fear-inducing force, without sustainably looking after the problem solvers. 

Protagion - Active Career Management is holding a virtual conference where I will be part of a free panel discussion exploring how building buffers (for resilience) and engines (for endurance) of Capital can help ignite your creativity. Free from the fear of success. 

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

Kool-Aid Man

I like being a believer, so I have always been susceptible to “Drinking the Kool-Aid”. I try balance that with healthy scepticism and good old fashioned South African distrust for authority. After giving a convincing answer in a client meeting once, I was shot down with, “That makes sense, but you have a silver tongue”. How do you respond to that? I also almost didn’t get a job once because a reference (attempting to be on my side) said I was very convincing. They didn’t want to hire a hard salesman. Everyone has to eat, so when an offer sounds too good… it is worth adding some doubt. The balance to hard sales is expectation management. Being completely transparent with the downsides and what can go wrong. Transparency requires the admission that we are all making it up as we go along. Making mistakes and making a living. Chipping away at problems and trying to get paid. Building cushions so we are okay even when we are not okay. Building containers so the people we care about are looked after even if they are not the best. Committing and believing.

Somebody Else

In my job hunting I have had many conversations with friends, former colleagues, recruitment agents, and friendly strangers on LinkedIn. Covid means I have not done the coffee circuit. I probably saw more people in week-long visits to Cape Town than I have seen in the (just more than a) month I have been properly back. Conversations move slowly. Even when there is an obvious vacancy. Corporates have to go through the process of advertising jobs, screening candidates, and rounds of interviews. I am doing the same in reverse. There are periods of silence. There are forms to fill in. People who do not turn up for calls. Sometimes repeatedly. I am still of the view that a job is a bigger deal for the candidate than the company. Someone will fill the role and the company will carry on doing its thing. As Tim Minchin says in a love song to his wife, “If I didn’t have you… I really think I would have somebody else.” For the candidate, it feels like more of a big deal. How you are going to spend a big chunk of your time. Where? With who? Tim’s point probably still holds true if you do not connect too deeply to any single opportunity. Push on with a little yogic detachment. It matters, but it does not define you.

If I didn't have you

Someone's Pitch

Money making boils down to solving problems. If you genuinely want to create compounding momentum, you must repeatedly make yourself redundant. To confidently do that, you need a sense of ownership. To feel part of a solving container. Otherwise, once you have a solution, why ask you again? There are 7.8 Billion people on the planet. As Warren Buffett says, “You don’t have to swing at every pitch.” You do not want to be someone’s pitch.

The other more cynical path is to make yourself irreplaceable. Create problems only you can (pretend to) solve.

I do not like that path. I like the path of genuine and honest problem solving. That requires trust, ownership, and inclusion in the containers we build. A strong enough commitment in a relationship to share the truth. One of the reasons we do not talk about what we earn, our real weaknesses, and what we do not know, is it can solidify internal waves of anxiety about inadequacy.

Which means there is a level of darkness about what opportunities are available. Which clogs up realistic paths of skill and knowledge development, and leaves solvable problems scabbing our eyes closed.

You are not the problem. The problem is the problem. Treating people like pitches, turns them into problems.

In Motion

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

Behind the Curtain

“Equality of opportunity is a political ideal that is opposed to caste hierarchy but not to hierarchy per se” https://plato.stanford.edu/entries/equal-opportunity/. To maintain the little man behind the curtain in the Wizard of Oz, you need to create the illusion that the hierarchy is both there, and deserved. The reality is, that even if you caste your hereditary privilege eyes wider than the family and eldest son, there are still limited opportunities. Both in time and space. Roles become vacant only when people leave or die. Teams have limited sizes. Team dynamics make it awkward when someone from the outside is picked (loyalty vs meritocracy). Problems are not defined by how many people want to solve them. They are just priced that way. It is well known that there are plenty of diamonds in storage. The price is high because of controlled supply and manipulative marketing. Give them enough to keep them hungry. It becomes a Game of Thrones when there is only one seat at the head of the table. When you fight for opportunity, only because you want that seat. A seat that does not get relinquished. For equal opportunity, you need more opportunities. For that, you need to be genuinely interested in solving problems. Not focused on keeping your throne warm and diamond-encrusted.

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

Don't Be Jam

“What do you want to be when you grow up?”. How you make money has got nothing to do with who you are! Making money has very tight constraints. You need a container. You need to be able to charge. You need a way to get paid. To turn an idea into money, you need to be able to describe very clearly what you are selling. What is the problem that you are offering to solve? What is the alternative reality you are going to deliver?

In a way that I say, “I can make Jam. Do you want Jam?” And you go, “I know what Jam is. I want Jam. You have got Jam. Yes, please can I have that.” I hand you a container. You hand me money. That is how it works. It is all about Jam, and having a container to put your Jam in. A way to sell it. And the vital point is… you do not want to be Jam.

When asked, “What do you want to be when you grow up?”, no one ever said, “I want to be Jam.” That is just the problem you want to solve. And the next week, you might not be selling Jam. You might be selling books, dry cleaning services, a haircut, or coffee. It is just a problem. You are not the problem. The problem is the problem.