Cut the Fat

Price is not value. Daniel Kahneman points out that while we might be intuitive grammarians, with our ears bristling when someone butchers our mother tongue, even those with years of training in statistics are not “intuitive statisticians”. Some truths require slow deliberate thinking rather than rules of thumb. Truths like there are no gods of investing. Investors who will agree “price is not value” will fall foul of this too when talking about “their value”. Everyone likes to believe they are the one that adds the value. That can’t be replaced. That other people can be cut out of the value chain, because other people are the fat. A high price is not an indication of value. It is more likely (1) scarcity, or (2) barriers to entry. An obstacle to creative destruction is that we all need to eat. We all need to get paid. We all need a source of wealth. The only way anyone will be prepared to be made redundant is if we believe we are included in the future that exists on the other side. Money is made by solving problems for decision makers. One of our problems, is that (without capital) we need problems. 

Are you the fat?

 

Key Person Risk

We live in a world where there aren’t enough jobs, and migration into rich countries is presented as a problem. This isn’t the way the world always is or was. Hut Taxes were introduced by British Colonialists as a way to force the required labourers into the monetary economy. Households had to send members to work for the colonialists in order to raise the cash to pay the tax. Liberia’s Hut Tax led to the Kru Revolt in 1915. The Bambatha Rebellion of 1906 pushed back on the British Employers in Natal (The Colony) when the Zulu people of the Mpanza Valley (now in KwaZulu-Natal) rose up. The challenge with a pass-the-parcel economy with globally stretched supply chains, and institutions (Nations and Companies) that have permanence and excess negotiating power is when a person’s “place in the chain” becomes redundant. Companies talk of “key person risk” but employees are the ones who live that risk. We live in a world where individuals don’t have the buffers of cash and capital of corporate balance sheets. Risk management starts from the bottom up.

Primary Zulu Language speech area (South African 2011 Census)

Team Sport

Money making is not about you. Hand-to-mouth living is all about you. “What do you want to be when you grow up?” is all about you. Meritocracy, performance attribution, annual reviews, bonuses, status symbols and conspicuous consumption can become all about you. About being good enough. Being worthy. Leading a successful life. Being a really big deal. Capitalism done well is a team sport. A sport in which there is competition, but players and managers switch teams and everyone meets in the bar afterwards. No company exists without suppliers, customers, regulators, alternatives and complex knock on effects. If you want to understand money, stop thinking about yourself. The song is not about you. Start thinking about the needs of communities. Start looking at every business you come across. “How is money made?” is a question so much more powerful than “How can I make money?” that it can release you to change the What to a Who. Who (not what) do you want to be? Let Capital set our Labour free. Build Capital.