Next Generation

The tragic thing about compound interest or capital compounding is that most people won't actually get to experience it. Even those of us who are good at delaying gratification (saving before we spend, rather than spending before we repay our loans) are still...

...saving or investing with the intent to spend.

Compounding only truly kicks in when you've got a lot of money, and when you're not constantly drawing from it.

Think in really simple terms: half a million Rand, 10% of that is R50,000; a million Rand, 10% of that is R100,000. It's *the same 10%*, the same merit, the same skill, the same performance—but it's twice as much money.

Why? Because you started with twice as much.

In reality, at the beginning, most of us have hardly anything to invest, so it's barely growing. Later, when we actually have money, we're often spending it, so we're continuously interrupting our capital's growth.

Very few people reach that point of soaring, where you're spending so little of your capital that it can compound properly.

That's when the magic kicks in.

Maybe the real answer is planting trees for the next generation.

Relax into Discomfort

The process of learning and engaging with the craziness of the world creates trials where it is okay to make errors. When you are in an environment where you have confident control over the risk of ruin. 

It is not a big deal if things go wrong. You want to be surprised. Like a child who delights in things not going in the way they expected. You can incorporate that learning and curiously see what is going to happen when you again poke the unknown. Confident in the ability to relax into discomfort to create powerful questions. 

This is something I have to work on. I find that when you care, and like caring, it can create tension. Those I care about the most sometimes don’t get the best version of me because I care so much. When something becomes so important that nothing else matters, humour can disappear. You can lose the things you care about most because you are trying too hard. 

One of the ideas I have wrestled with is “unconditional love”. The lack of boundaries can ironically mean it is impossible to relax. I don’t like the idea of escape hatches. I think you need to do the work when things go wrong. You can’t build if you are constantly restarting. 

Returning to some basic self-care, and holding onto the ability to repair, recover, and regenerate, can increase the capacity for commitment. Awareness of the limits of temporary learning, and when retreat is necessary. 

You don’t need to learn through pain. Controlled stress is sufficient. Playing within limits, and having a good sense of what limits you are comfortable with. Part of investing is taking risks, but you are not rewarded for taking risks. You are rewarded for adding value. 

The key to a powerful timeframe is self-awareness, self-knowledge, self-love, and returning to a foundation of basics.

Regeneration

Hard, Boring, Long

The world is complex, random, and ambiguous. I like it where there is a process I can repeat with things I know that work, and will stay the same. I am not afraid of hard. What gets me down is wasted time. Fake work and indecision. 

When I have faith that I can just chip away at something, the disempowering anxiety that comes with “not knowing what to do” calms down. 

One of my passions is language learning. I can still only really speak English, but I am following the process of Fluent Forever (Gabriel Wyner) to train my ear and mouth muscles on lots of different languages. Not an easy task. What I like is that in 10 years, 20 years, 30 years, it is unlikely that there aren’t going to be people who speak those languages. The effort will have been worth it. 

There are certain difficult things you can put the effort in on, where the unknowns are limited. One of the best competitive advantages is choosing things that are hard (in very simple effort terms), boring, or take a lot of time. Language learning is a great example. Breaking out of our mother tongue is incredibly challenging... yet lots of people do it. 

There are advantages that even if you do in the open, and tell people how to do what you are doing, it will take time and application for others to catch up. “People tend to overestimate what they can achieve in a year, and underestimate what they can achieve in a decade”. 

Long-term plans you have to chip away at can be significantly more sustainable than quick wins that burn bright and fade out.

Adding Time

Slow but Effective

Desire for quick fixes, makes facing intimidating mountains a good barrier to entry (once you are on the other side). 

Exams can provide this barrier. Being good at something, is not the same thing as being able to explain (or even know) why you are good at something. Being good at exams is different from knowing the content. Exams impose artificial constraints. Time limits and the interpretation of markers. 

Reality normally lets you use google, maps, or GPS. “Only when the tide goes out do you discover who's been swimming naked” is Warren Buffett’s reminder that difficulty is revealing. 

Exam “match fitness” is the ability to deliver under constraints if questions go off the beaten path. 

If you have surface-level knowledge, you can pass tests, if nothing goes wrong. If the right questions are asked. That can develop confidence as you know a single path to success.

Embodied knowledge lets you understand the broader context. It is more sustainable. Which is why challenge allows deeper soaking. Basic processes can let you build that depth. 

The yoga I practice will be the same in 30 years. In 100 years. It is not variety it is teaching. Lots of people will find it boring, preferring postures that change. This style focuses on 12 basic postures, but those who go deep will develop the flexibility to deal with variations. 

No quick fixes, but a process that works.

Sani Pass

Competently Incompetent

Confidence is attractive because it suggests insight into bewildering complexity. Admitting you are lost doesn’t feel like, or often translate into, a great sales technique. 

I find the strength, and patience, of Arya in Game of Thrones more appealing. Where she goes through the stage of “a girl has no name”, and she learns to find her way when she is blind. 

We can get overly attached to the story we tell ourselves about our lives. The narrative. Life has had a way of humbling me. When things change dramatically, I have to edit my story. I grapple with life trying to control me. 

I do have moments where I feel a sense of freedom through insights. But then the waves come back again, and I go back to grappling. An H-like furrow between my eyes from taking life very seriously. 

Repeatedly coming back to a very basic practice can provide a solid foundation. A dependable place of return, before you have to go back to the madness. 

Truth be told, I love the madness. Free will is 100% dependent on madness. A complicated world means we can be seduced by specialisation, and forget how to be competent at life. To be competent at being incompetent. 

Our bodies, minds, and relationships are use it or lose it, so the systematic practice of yoga means you do a body scan to notice where you are carrying tension. Like climate change, slow significant changes can only become apparent too late, if you don’t consciously build in ways to notice the gradual but compounding consequences of little choices.

Monday Happens

Behaviours get embodied. When we respond in a certain way for years, we can cease to be aware. Our minds and bodies are ruthlessly focused. 

If you do press-ups, they will progressively get easier. If you aren’t exercising, then you go for a run... you will be sore, because you have told your body those muscles don’t matter. 

Regularity allows deep soaking. If you learn superficially, then the knowledge can disappear. Explaining or teaching is one method to allow you to constantly re-engage and not forget the steps. 

"The Curse of Knowledge" is when we forget what it is like not to know. 

If the steps suddenly stop working, it can be hard to fix the problem if you have been on automatic pilot. 

In Jonathan Haidt’s analogy, the elephant is in charge even if the rider looks like they are holding the reins. 

The elephant is our habits. The rider is our perspective of the decision-making. The rider can point, and even believe they are in control, until the elephant wants to do something else. 

You can train your elephant, but it takes work, consistency, and time. I believe in Free Will. But it is incredibly hard. You don’t just have life-changing epiphanies in a weekend away, or by reading an article online. 

Monday happens. Repeatedly. Do the work to create the meaning you want. Invest in the resilience and endurance needed to hold space for you to create.

Galileo's 1616 drawing

of the phases of the moon

Creative Process

When I started writing blog posts daily, I jotted ideas on a list as they came to me. One sentence/word notes to myself. Gradually "about what" generation and writing became a habit, so that I didn’t even need to refer to “stored ideas”. 

Even as I started working on a first book, the idea of writing a book still intimidates me. Blogging no longer does. Neither does putting my ideas out in public, since I have been doing this regularly. I store the posts I put on LinkedIn, and I have written 235 pages (about 170,000 words) since February 2019. Longer than a book, but not a book. I still have work to do in the editing etc. 

I am most productive when I have confidence in a process that works. Second time is less scary, but you don’t get a second time without a first time. 

Part of my creative process this time, was recording myself talking to myself. I mapped out 12 chapters based on what I had been grappling with for the previous 5 years on my blog. Then some sub-points for each chapter. Then I just spoke about it, and recorded that on Zoom. Then I used Otter.ai to get a transcript. 

Now, I am gradually working through that transcript day by day. I write a paragraph based on the next bit of the transcript, then use naturalreaders.com/online/ to read it back to me. 

A long process, but fortunately I am not scared of things taking time. I think the best things do. Most of all, I enjoy the process. 

Thinking aloud instead of in silence also means I am engaging with people. My water cooler conversations often relate to a post I have written, but it is the colleague who brings it up. Stumbling on and grappling with ideas that resonate is why I enjoy my creative process. 

I am still intimidated by the idea of writing a book... but, it seems, that is what I am doing.

Wafer Thin

When I “stopped working” in 2014, I had ideas for projects I wanted to work on. What I meant by not working, was not working *for money*. 

I was just frustrated with what felt like a toxic environment. With answering the question “what do you do?” with what I do for work. With my default laid out, bar 20 odd days of leave a year. 

I still wanted to work on interesting problems, but with a different filter. Not all good ideas are good business ideas. There are a lot of things I wanted to do that I couldn’t justify. 

Another frustration was the amount of time I spent communicating what I was working on! Explaining myself. Communicating what needs to be done to people who aren’t doing it. When you get the sense that you are Sisyphus rolling a rock up a hill just to roll it up again. When you aren’t convinced of the incremental change. What the late David Graeber called “Bullsh1t Jobs”. Or fake deadlines where someone tells you to get something to them by the time your head hits the pillow... then they don’t look at it for two weeks. 

Much of my anxiety came from a sense of killing time. Time is the thing that is most valuable. That was what I wanted. Time free from price. I am also aware of path dependence. I did what I did because of the cumulative decisions that were presented to me, and that I made. Changing paths is hard when the path is relentlessly repeating. 

There can be wafer thin boundaries between what we do, and what we could be doing... but we simply don’t have the time to breathe and notice.

Full Time

I stopped working in the Corporate World in August 2014 (Spoiler alert – I returned in February 2021). The first thing I wanted to do was to travel. 

I had a close family friend’s wedding coming up on the opposite side of the rock (Australia), and I now had time available to accept the invitation. 

In the UK, standard leave entitlement is 28 days, with it being frowned upon to take more than two weeks in a single chunk. Australia is a long way to go for that kind of break, both from the expense and the jet-lag perspective. Leave becomes preciously allocated. 

Work becomes the default. What you do every morning. The way we structure work is typically “full time”. Work will be found. It is not a case of whether there is work to do. You never get to the bottom of the work container. Work is a deeply engrained habit. So much so that it is hard to do work when there is no structure. You can say to someone, “Yeah, sure, we must do coffee” but you don’t arrange a time, and so it doesn’t happen. 

So rules that remind us to do things are helpful, but the “full time” rule seems a little excessive. It can mean that you don’t end up doing a lot of the things that are important to you because work takes priority. “Sorry I don’t have time, I have to work” becomes a one-stop-shop wall that cannot be legitimately questioned.

Taking Time Down Under

Time to Judge

One of my unlikely financial heroes was Bill Cunningham. He didn’t manage money. He took photographs. The friends who nicknamed me Donkey (“noisy, stubborn, ignorant”) will appreciate why I love his line, “if you don’t take the money, they can’t tell you what to do”. 

He was not rich. Quite the opposite. Yet since he lived so cheaply, that gave him the creative license to do whatever he truly wanted to do. That passion fed through to his art. 

If you are able to build an engine that earns reliably more than you consume, you can focus on things that aren’t conspicuous. You are wealthy. You can release yourself from the pressure to constantly justify yourself, and prove that what you are doing adds value. You can do things that only have value in the long term. 

Rather than disappointing people who expect far too much in too short a time frame, you can wow people who underestimate what you can do in the long term. 

Especially if the time you are thinking of is longer than people use to judge.

"If you don't take the money, they can't tell you what to do."

What Makes Money

Income and money operate at a very explicit level. Pay for what you see. Fully acknowledging what makes money and what doesn’t, and not using force to get your way, allows you to go deeper and wider. 

You can shift to embodied learning. To things we can’t explain. To the tacit knowledge that is held by people on the very front lines with zero distance from decision making. Knowledge built through immediate and repeated feedback cycles and real wrestling with real problems. Understanding that is impossible to pass up the chain. 

Research and development can take a lot of time and become a part of you. Where the payback is hidden. 

Competitive advantages I like are ones you can do in the open. In “The Art of Learning”, Josh Waitzkin talks about his jiu-jitsu teacher publishing his training videos. This surprised people, because he was freely giving away his secrets. His answer lay in his confidence that if you were concentrating on what he was doing, he would be a step ahead, because he had gone deeper. 

If you have to safely guard a secret, it’s not really a competitive advantage. It is a fragile wall. 

With an enduring advantage, you can tell people what to do, but the time, commitment, and effort will scare them off. Particularly if that mastery doesn't make money. They will head towards the six easy steps to financial freedom in six months. Not the life of hard graft that will set up the next generation.

Time - Commitment - Effort

Beyond Etch-a-Sketch

Time is the foundation of property rights. If you know that whatever you are going to do is going to get etch-a-sketched, then you rightly will think with a temporary mindset. Live in the now. You can’t trust there will be a tomorrow. 

If you know you have got a plot of family land for the next thousand years, and no one is ever going to take it from you... the connection to that land will run deep. If you feel a connection to your future family, you will be willing to build something where each generation successively acts as custodians. 

That is why really deep, old money, is family wealth. Where you have family constitutions, and succession planning, and even set up family offices that employ lawyers, accountants, investment professionals and others to help with the complexity of support structures. You are training the grandchildren to take the reins of the family one day. There is a connection across time. 

That is very different from someone who plans to consume their money during their life time... no inheritance, no worries! 

Real wealth is built over incredibly long timeframes. Not even necessarily at high rates of return. Slow, stable, reliably positive return that just keeps quietly coming. 

You may worry if the return is too high, because that raises the possibility of an explosion in the other direction.

Connected Time

I stepped away from working in the corporate world in 2014. The initial plan was to scale back my expenses and live conservatively off my invested capital. To focus my time and energy on things that were abundant and low-priced (like reading, writing, and spending time with people). 

I became a universal basic income activist. Understanding the concept of “giving money directly”, and cutting out the expense involved in giving advice and imposing your world view. As Rutger Bregman says, “Poverty is not a lack of character, it is a lack of cash” (See “Utopia for Realists”). 

What we all need is a solid foundation to work from with a lack of fear. Like attachment theory with child psychology. Healthy kids are happy to explore, because they know they have somewhere safe to go back to when they get hurt. 

Each time something goes wrong, their confidence increases, because they know they will be fine. They know they will be looked after. With something as basic as a cuddle. Fundamental security seeps into their bones, changing their perception of risk and the way they make decisions. Whatever happens, I will go on. 

That immediately increases the length of time your decisions involve. Sparking the most powerful investment tool... connected time.

Rupert with Time

Near and Now

There is a tale of Alexander the Great coming across a yogi as he was venturing and conquering east. The yogi was sitting on a rock. Who has lived the good life? Look at all the things Alexander has done! Bertrand Russell’s book “In Praise of Idleness” opens up our weird relationship with the conspicuous. Our preference for fake work over space and reflection. 

We are not well trained to kuier. To spend and savour time with each other. When kuiering with someone, you turn off the measurement. Perhaps you are laughing with someone to the point it is contagious. Where the laughter goes beyond the joke, and you have a moment where you look at the person and think, “I am so glad you exist”. 

A connection that has nothing to do with weighing and measuring. You just see the other person, and get a sense that they are a part of who you are. Not the part of you that passes. The part you really connect with. 

The glorious nature of being human, is that when you are that connected, you can always feel that person's presence. Even if they physically die, they are a part of your story. You can close your eyes, and they are still there. Bending space and time. A close family friend described this beautifully in a recent virtual memorial after the unexpected passing of his wife due to Covid. The sense of her being near and now.

Map of Alexander's Empire and Route

Small Sustainable Adjustments

“Stubborn Attachments” by Tyler Cowen talks about some of the problems of financial decision-making across time. How do we balance actions and long-term consequences in guiding our choices? 

Discounting cashflows is one way to take into account the “Time Value” of money. A Dollar today is worth more than a Dollar in 5 years' time. Making decisions based on discounted cash flows ends up almost ignoring 15–20-year time frames. The underlying assumption is you can reinvest at the end of the period. 

I take the essence of his argument as a focus on Maximum Sustainable Return. Sustainability is key. You need endurance to make sure you are in it for the long run. To extend what you are doing to the next generation, and the generation after that. To adapt your thinking from 5-year plans to 1,000-year plans. Consequences beyond "you". Where BIG interventions fizzle, but small sustainable actions have big long-term effects. 

Epiphanies, vanity projects, and conspicuous victories are much less impactful than small sustainable adjustments. “Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.” (Amara’s Law). 

Time is the most powerful investment force.

Le Temps

Space to Value Time

Tim Urban (waitbutwhy.com) talks of time optimism. It is a euphemism/kind way of referring to being late. Busyness is a form of laziness. If you are time pessimistic, you leave space. You don’t start new tasks if you don’t have the time to give them the necessary container (focused attention). You allow space, to be on time. On time *for* people. As a matter of respect. If you are constantly making people wait for you, you are not going to get many chances. But that does mean, as the time pessimist, you are regularly going to be the one waiting. Because you have created space. That space is partly an acknowledgment that other people’s time is as important as yours. We all get 24 hours a day, rich and poor, powerful and powerless. Busyness is often used as a conspicuous signal of importance. We can’t know what people are doing that matters, but being late implies that thing is more important than the person you keep waiting. When you're doing a presentation, “sorry, I put this presentation together at the last moment” is not good enough. It means in a room full of 10-100 people, that you think that your time is worth more than all their time combined. Because it is the one true point of equality, we should not waste other people's time. 

"Why I am always late", by Tim Urban

Two Marshmallows

I don’t like being the bad guy. I don’t think most people like that, but I don’t subscribe to the “it doesn’t matter what other people think” philosophy. You can only make purely independent decisions if you are a hermit. If relationships matter to you, then connections and consequences matter. Yet there is a balance. Your interests matter too. One behaviour that creates capital is delayed gratification. If you are living purely in the now, then every decision is about the now. You are not building space. You are not building time. You are not building capacity. Because everything is about now. There is a story (controversial in its scientific rigour) about putting Marshmallows in front of children. If they can wait for the researcher to return, they get two. The test was meant to evaluate the ability to take charge of your emotions. A powerful life skill. The controversy is over whether this an innate or learnable skill. Imposing delayed gratification on others isn’t fun, and building capital is a team sport. We make many of our financial decisions together. Our joint decisions are the key to whether we consume what is created or whether we act as custodians and reinvest. Building space, time, and capacity.

 

Long Term

Although investing is a long-term game, our working careers are short. 5 years is not a long time. Even 15 years is only just long enough for compounding to start hinting at its magic. In “The Psychology of Money”, Morgan Housel points out that Warren Buffetts' biggest weapon was that he started investing at age 10, and has kept at it without quitting for 80 years and counting. At the time of writing the book, Buffett’s net worth was $84.5 Billion, of which $81.5 Billion had been made since his 65th birthday. Housel’s rough estimate of the size of Buffett’s Engine if he had started at 30 (after enjoying his 20s/setting up home), and stopped at 60 to golf, is $11.9 million. That is a big Engine. But no one would know who he is. 80 years is the number that really matters... and all the small numbers that contributed to the foundation years are the only reason the glory years exist. Merit applied to nothing doesn’t get seen. Conspicuous Merit always builds on deep history. 

Time measured in Ice Ages

 

Allowing Space

If you are time rich, rather than money rich, you need to learn to create boundaries. It's very similar to the rich-rich when people start asking for money. People start using your time more conspicuously, if they feel entitled to it because they are busy. When you create space and someone else doesn’t. It's a little bit like being punctual. The people who aren't punctual arrive late and make people who are punctual, wait for them. Which even though it is perhaps not intentional, is a way of saying their time is more important. Tim Urban writes about chronically, late, insane people (Clips). He calls it time optimism. They (and he includes himself) always try fit too much in. I am typically on time, and part of the reason for that is I stop doing whatever I'm doing early. People like me are time pessimists because we leave gaps for the next thing. I do a lot of waiting. We need to build a whole new way of looking at respect and how we recognise people, if we're going to change the way we make our decisions around money. Allowing for gaps. Allowing for the things we can’t see. 

"Why I am always late" Tim Urban

 

Ongoing Source

Building wealth takes time. 15 years is an aggressively short period to build an Engine (Capital that can earn enough to cover your expenses). Unlike saving with a picture of what you are going to spend your money on, building an Engine aims to build an ongoing source. You can’t build wealth without a source. You can’t build wealth if you consume everything that comes from the source. You DEFINITELY can’t build wealth if you consume more than what comes from the source (and live off increasing debt). Most people live hand-to-mouth. A few manage to build capital to finance their retirement. This will never change if we consume everything we produce. Time and space is needed. Establishing sources of wealth. Then creating space between our hands and mouths. Then giving proper time to let capital work. Till we can live off the fruit rather than shrinking the number of trees.

An Ongoing Source of Energy

An Ongoing Source of Energy