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.

Nothing Pie

There are a few hard truths about investing. The market is both noisy and irrational, and making good decisions is not the only factor in success. It is not even the main factor. The father of Fundamental Investing (“Security Analysis” Benjamin Graham 1934) only outperformed passive investment by about 2% over his career. Making alpha (outperforming the benchmark) your goal is incredibly dangerous. It opens up an existential crisis where an entire career can factually (by your own definition) have added no value. You cannot eat alpha. Alpha on nothing is nothing. 100% ownership of a 10% alpha generating nothing pie is nothing. Often the conspicuous success of investors is based on (1) inherited wealth, (2) big salaries, (3) sales, and (4) fees. The main factor in wealth creation is saving and reinvestment. Getting money a job. Making sure that job adds value. Reinvesting the money money makes. It is not about you, how smart you are, or whether you see the matrix. I am not Neo. You are not Neo. No one is Neo. The world is complicated, ambiguous, and random. There are no heroes. We are all just doing our best.

Take as much as you like

Polis Smous

I started my career in Finance in South Africa and the United Kingdom during two watershed moments. Just after the bursting of the Internet Bubble, and during the cracking of the walls around endowment policies and remuneration of Insurance Sales. Endowment Policies pay a lump sum after a specific term or on death. They combine investment and risk cover. The sales people often were not professional financial advisors giving appropriate advice. They were remunerated up front, in commission. If the client stopped paying their premiums, or another “Polis Smous” (Policy Hawker) convinced them to churn/swap, there were big, indefensible, clawback penalties. The scandal made the environment ripe pickings for “Pure” investment or risk products, and saw a massive professionalisation of the advice industry. Allow time to pass, and even the pure grow and get legacy skeletons in their closet. The constant trade off between starting from scratch, and keeping the good bits of the old way of doing things. As the environment changes, we need to change. The question is whether we are brave enough to be transparent and honest.

Stealing from Friends of Friends

A Ponzi Scheme is when the money you pay to join gets paid to someone who is already in the scheme. The promise is that you will then get paid by new recruits. Normally a multiple of the amount you initially paid. It seems like magic. Because it is. If you cut out the noise, you are effectively stealing money from each person you recruit. But they then recruit others so it “cancels out”. When new recruits run dry, and they will run dry, the last people to enter are the final losers. So instead of stealing from your friend, you are stealing from a friend of a friend of a friend of a friend. The layers make you feel better. A Ponzi Scheme is wealth extraction. Typically from the vulnerable. Perpetrated by well meaning believers. The way to spot a Ponzi Scheme is to look at the Fundamentals. How is money being made? What real problem is being solved? What real Win-Win wealth creation is going on? If you can’t answer that, then it is Win-Lose wealth extraction. Then the “product” is other people’s money.

Be wary of layers

Seems Basic

Social Media makes it very easy to sell basically anything. The tools are there, and the numbers game is easy. If you can convince someone they have a deficiency in their life, and you have the solution. This doesn't sit well with me. Jonnie Hallman says he still has no idea how people can work a full-time job, cook dinner often, exercise regularly, enjoy weekends, and keep the apartment clean. "Seems basic, but I can't do it consistently". I believe part of the problem is we are trying to force everything into the transactional world of monetisation. We don't support the ordinary, because that is hard to turn into greenbacks. To empower relational thinking, we need to realise that not everything is a good business idea. Not everything needs to be cast as a problem. Not everything needs to be framed in a "what do I get out of this" way. Basic isn't a problem. It's a foundation. But no foundation is a problem.

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