Understanding Incentives

The world is getting progressively (but bumpily) less racist, sexist, homophobic, and classist. We are breaking down barriers, but we still have hierarchy. The concept of people being better and lifting groups of people. The directionality of that is interesting because living a simple life can be a choice. There is a story of Alexander the Great out empire building and he comes across a sage sitting on a rock. The one doing external work. The other doing internal work. The Gini Coefficient measures inequality. A Gini of Zero (0) in a two-person world would mean Alexander and the Yogi had the same. One (1) would mean Alexander had it all. If we shared everything, there would be no incentive to get more because it would immediately be watered down (particularly if it was among the 7.8 billion people on the planet). We want to have a sense of reward for what we do. Conspicuous reward. Well done, here’s a gold star. Here’s some money. That’s how we do incentivization. You do something. You get measured against other people. You do something more. Understanding what we do, starts with understanding what incentivizes us.

Gini Coefficients by Country

The Nut of It

 “vitarka vicara nanda smita nugamat samprajnatah” Yoga Sutras

“Samadhi with consciousness is accompanied by reasoning, discrimination, bliss and awareness of individuality.”

What exists beyond the things we are aware of? The unseen beyond the waves of thought and anxiety. You can choose to simply “not care about money” because you don’t think it is important, but understanding it gives you greater control over it, rather than it having control over you. Meditating on things in space and time (Savitarka) allows you to progress to thinking of things outside of space and time (Nirvitarka). To find bliss (ananda) and get close to the seed of complete awareness (smita). The Dutch call the point, “the nut”. The reason. The thing. The purpose.  Siddhis seem like “supernatural” powers, which come from understanding. From developing skills and knowledge that seem stronger than the waves which control the rest of us. But truly conquering the waves of money anxiety is realising it isn’t about you or how impressive you are. Unless you change what you think of as you. Still, invest in skills and knowledge as part of your practice. Gain understanding. Always be learning.

Horsepower

Not all good ideas are good business ideas. Not all good business ideas are good ideas. We can’t reduce a complex world down to clear decisions that don’t have trade-offs, and uncertainty. Decisions have consequences. Within businesses, this complexity can be left to the judgement of those where authority lies. Businesses have Cost Centres, and Profit Centres. Things that don’t bring in money, but are still considered ambiguously worth it. Maybe even considered the Core Purpose. The Profit Centres are the Engine. Print Media has gone through the disruption of having its Engine removed. Quality Content was the Core Purpose. But Advertising was the Engine. Search and Social Media swooped in. Now lots of people produce content (of ambiguous quality) for almost free. I have written over 2,400 posts in the last 5 years for £23.44. Except I don’t get paid till that hits £60. Don’t hold your breath. I’m not. No one clicks on my ads. It is important to work towards a detached Engine, so that your purpose doesn’t get its financing removed if the rules change.

Generating Power

Happy 26th Birthday South Africa

I have always been an earnest chap with a chip on my shoulder about being taken seriously.  Easy to tease. Easy to provoke. By age 26, I had my first professional qualification and thought this gave my adulthood some spine. I moved cities from where I had studied in Cape Town to the heart of South Africa's Engine room Johannesburg. I cut my hair and swapped my eccentric tops for a proper work uniform. Peacocks get seen but often dismissed. I rented a flat on my own and started playing properly at adulthood. The change of city, and change of community, just started to poke my bubble. To look up and to look out. A stable income just starting to provide a foundation to move beyond the question of "What do you want to do?". I was doing it. What was the next question? The deeper question? Happy 26th Birthday South Africa. What is the deeper question?

 

Building Campfires

A Community could invest in its common endurance and resilience by building a Community Wealth Fund that pays a basic income to its members. This could be financed through a combination of redistribution and wealth building. Any Community is built up of people who are learning, people who are doing care work, people who are doing work that gets paid, and people who need support. They all contribute in different ways. The hard part is finding the common ground that pulls the community together. The campfire that provides enough light for people to see themselves in the others. The vehicle is then easy. Collect money, distribute some, invest some. If you (you now being a community) spend less than you earn, you can build Capital that can create a solid foundation. Where you are not alone. Where you are more than you. “If you want to go fast, go alone. If you want to go far, go together”.

What Reality Counts

Not everything that counts can be counted. Investment is not a game you play where Risk and Return are knowable and the only two items on the scoreboard. What you do genuinely matters. Fundamentally. It’s not a game. My biggest quibble with wealth creation is the illusion of control and associated arrogance that can arise in people who have “done well”. Like the TV series Westworld where the penny drops about “what are we actually doing here?”, it is easy for us to get fooled by randomness. To see patterns we want to see. To get lost in our own illusions. At times of major crisis, you need to look beyond the numbers. What really matters? What is a distraction? What is the core that will allow you to rebuild? What are you building and why? Throw away the stop watch. The time sheets. The productivity measures. Time and opportunity cost lose their power. Repurpose to meet the challenge.

What really matters?

Holy Cow

Milk doesn’t come from the shops. It comes from Cows. Most of the products we now end up using are assembled from bits that come from all over the world. The words we use have danced off the tongues of hundreds of thousands of people as they criss-cross the globe. Sharing flavours. Bending structure. Breaking rules. What you see isn’t all there is. The problem with bowing down at the alter of the obvious, the conspicuous, and the evident, is it cuts us off from the stuff you can’t count. Quantitative Finance likes to boil decisions down to two numbers. Return and Risk. The problem is, you don’t actually get paid for taking risk. In the long run, you get paid for adding value. Value is a deeply complicated, often abstract, internal, personal, and relational story. It is important to regularly remind yourself where your milk comes from. To look for, and retain awareness of, the source.

A calf and a Sadhu

Thinking in Contrasts

We think in contrasts. Things become what they are in our minds because of how they are different. That is where Benchmarks become useful. They allow a form of score-keeping because you have an idea of the alternative if what you are offering is not available. Like sugar, fat, and salt, they are also dangerous. The goal isn’t to beat the Benchmark. The goal is the goal. In “The Art of Learning”, Josh Waitzkin discusses the principle of “numbers to leave numbers, form to leave form”. The goal isn’t the numbers. The goal isn’t the form. They are simply learning tools in the way a Benchmark is. What matters in investing is (1) being a good custodian of the Capital, (2) the creativity that that Capital empowers. Alpha is the term for how much an investor has “beaten their Benchmark”. You can’t eat Alpha. Eventually you let go of the contrasts and engage directly with what it is that matters.

"The Garden of Earthly Delights"

Hieronymous Bosch

Powering Dreams

The first Industrial Revolution introduced machines. The second changed the way we do things, to best make use of those machines. The third shifted machines from mechanical to digital. The fourth will again change the way we use things and do things. All these huge turning points affected both our daily lives and the way we identify ourselves. Real empowerment isn’t us being scared of, and so avoiding, being replaced by machines. Real empowerment is us pausing to reflect on what we want our daily lives to look like. How we want to identify ourselves. Then being in a position to choose. Living hand-to-mouth and tying our identity to our labour makes us a cog in the machine. The real Revolution is realising we sit above that. That we can consciously build Engines to power our dreams.

Powerloom Weaving in 1835

Create

In a lot of cases, the generic product people are selling is Confidence. The world is confusing, ambiguous, complex and random. When someone can paint a simple picture with an aura of certainty, that is attractive. We think in stories. One of our storytelling devices is numbers. Being able to simplify complexity down to a number allows us to compare, prioritise, and decide. It helps us manage the craziness. The challenge is to always remember that numbers aren’t answers. They are questions. The best we can do is build endurance and resilience to help stay in it for the long term, and handle the bumps and dips. No one knows, and only you know what it is you want to create. Only you know what the point is. The answer to that isn’t a number.

Complex Numbers

Two Ways

Three important concepts when thinking about living a fulfilling life are Commitment, Openness, and Results. There are two ways of looking at each of these ideas that can seem, or be, in opposition.

Commitment can mean showing up with a level of intensity. Being fully present, and willing to bring everything you can offer, every time. It can mean a level of quality. 

Instead of showing up "this time", it can also mean showing up "every time". Less intense, more long term. "There is nothing to writing. All you do is sit down at the typewriter and bleed." Ernest Hemingway. Hemingway didn't wait for inspiration. He didn't wait for quality. He built habits that created the environment in which quality is born. He did the work.

Openness can mean a willingness to try everything. It can mean letting go of reservations and leaning into experiences and ideas. A level of flexibility.

Instead of always being prepared to change paths, it can also mean listening while staying on a chosen path. The grass is always greener, and real growth takes time, patience, and building. You can recognise the challenges on your path, and work on them. Every path has challenges. Starting again has costs. Openness doesn't require action as proof.

Results are the way we count and identify growth. Growth is our scorecard. We need to identify a place we were, a place we are, and a place we are going to. Something with words and numbers we can articulate to paint a picture of change. Results are the cornerstone of plans and goals.

Not everything that counts can be counted. Some work is internal. Alexander the Great was a brilliant strategist, and military genius. A man of results. As his Empire expanded East towards India, he came across famous meditating Yogis. Alexander's fame was for conquering the world. The Yogi's success was "conquering the desire to conquer the world". My friend Francois calls this the "Paradise Principle" - where even the staunchest non-believers live a postponed life for some imagined future. Tolerating the present for a future pay-off when our lives will commence. Not all results are about change. Some are about acceptance and awareness.

Commitment, Openness, and Results take different forms. Choose those forms consciously.

Are you Empire building?

Emotional Integrity

Emotional is not the opposite of Rational. Emotions can be, and normally are, Rational. There is a reason for why you feel the way you do. If an emotion is irrational, discovering that can be a powerful tool to let it go. Unless there is some clinical issue that requires help. Emotional Integrity is a variety of happiness. Robert Solomon sees it as an ongoing "meta-emotion". Happiness is a summary evaluative judgement of us being in the world. Spirituality a way of taking that up a level, expanding the judged self to be suprahuman and all-inclusive. Emotional Integrity is developed when reflecting on values, purpose, and whether your emotions are constructive in building the type of life that resonates well. Emotions that serve.

Emotions that Resonate

Emotions that Serve