Thursday, January 27, 2022

Beautiful or Thorny

It can be dangerous to try count things that can’t be counted. Sometimes the answer is “we don’t, and can’t, know”. Sometimes the answer is qualitative. 

You can wrestle with beautiful or thorny questions through first-hand, on-the-ground, stories that don’t scale. You can soak, chew, listen, and be influenced but you cannot weigh, measure, rank, and sort. 

Many people will impose frameworks that have worked for them in one area, in another. Like the investment analyst who thinks you can apply an investment process to everything. Then ESG (Environmental, Social, and Corporate Governance) or Philanthropy come along, and instead of using wholly different tools... the spreadsheets get whipped out. 

In investing, the decision ultimately boils down to buy or sell. With a lot of issues that matter... it is vastly more complicated than that. The rules of money simply don’t apply to many of the decisions we want to make. 

Yet they often still require financing. They still require capital to be allocated to them. The temptation that needs to be resisted is to force everything to become a business. Where how something needs to be financed is the key driver of the identity of what something is. 

Instead of having the wisdom to sort between things that can (and should) make money, and things that make a meaningful life.

Wednesday, January 26, 2022

Nothing Else Matters

It isn’t only the idea that matters. It isn’t only your merit that matters. Liquidity (enough to cover immediate needs) and Solvency (you have more than you owe) are cornerstones that carry anything with potential value through the chaos. 

Liquidity recognises that the short-term can swamp and swallow true value. If you think of true value as what would happen if everything went according to plan, and everyone saw the world as you do. 

Solvency is what lets you carry on carrying on, for a chunky period of time. 

If you aren’t being creative in the long-run... Liquidity and Solvency won’t save you. What they do do, is prevent you from being forced to make decisions. 

If “No” is not an option you have, the forces of supply and demand will eat you alive. Desperation is blood in the water to sharks. If you have to buy, at any price, the price will go up. If you have to sell, at any price, the price will go down. 

Value is almost meaningless in a pressure cooker. If one thing is so important, that nothing else matters... you won’t be able to see, hear, or feel anything else.

Tuesday, January 25, 2022

Investing Time

As soon as you have the capacity to detach, and not be a productive asset, you are playing a completely different game. 

If YOU are “not required”. You have the ability to invest time. This may, or may not, be for something that will turn you back into a productive asset. 

Some areas require years of education before there is any sign of output. Sometimes, you even need to put in years of education just to be able to understand the signs! 

Money is a blunt cross-discipline tool to demonstrate output in areas others don’t understand. Someone pays you to do that? Someone pays you a lot to do that? Ok, it must be valuable. 

Not needing to demonstrate value in the short term allows you to go through long stretches of not knowing what you are doing. Asking embarrassing questions. Feeling annoying. Connecting dots. Mapping your ignorance. Not being respected. 

We sort people based on how quickly they pick things up. Sometimes, deep understanding requires admitting ignorance AND YET persisting. 

We have a bias to monitoring and action. For some things to do their work, they need to be left alone. For some things to do their work, they can’t also have to do the communication work of keeping others regularly informed.

Monday, January 24, 2022

Time and Effort

If you are living hand-to-mouth, you have no option but to solve the immediate problems in the way you are most confident works. 

Building space, to take knocks (Short Term - Resilience) and give you confidence that sufficient time is available (Long Term – Endurance), allows you to look at problems differently. You can afford to try something different. 

This is the capacity that allows firms, countries, and people to invest in research and development. To allocate money to potential. Most people are looking for quick fixes and easy solutions. The higher your required rate of return, the shorter the time frame that is considered. 

One of the strongest competitive advantages you can have is willingness and capacity to commit to obvious, but hard, challenges. Where everyone knows the answer, but it is too much effort. 

Like getting fit and eating healthily. The further down the road the payoff for effort is, the more support you need till that pay off arrives. 

Most of us know how to run, and have done since we were kids. Few of us have run marathons because of the hours of training and effort required. A lot of people just don’t want to run marathons. Some want to. Theoretically. Maybe. Probably not. 

A common skill many Olympians share is the capacity to not have to earn money during the time they are training. Time and effort are significant barriers.

Time and Effort
to overcome barriers


Friday, January 21, 2022

From a Point

You can rage against the machine, or you can start from a point of deep understanding of where you, and others, are. 

The way we communicate and the choices we make stem from deep soaked agreements. The vehicles we use (companies and countries) are just stories. A way we work together. Money is also just a story. A tool we use to cooperate. 

In order to interact with others, you need to learn about how we communicate. Embedding yourself in the language to let you make choices in ways that are consistent with your values. From a place of understanding. 

Once you have a point of focus, you can select where to deepen your skills and knowledge. You can have a selected portfolio of jobs for your money, and concentrate your attention on understanding those. You don’t have to have a view on everything. 

If the area you are looking at gradually increases your ability to not have a view on things you don’t want to pay attention to. 

Stilling waves of anxiety comes from decreasing the ability of waves to impact you, and simply wash over. Less unconstructive raging, and more focused, connected, and conscious engagement.

Thursday, January 20, 2022

Spending and Earning

Sustainability is the key to compounding. Although what you do matters, what you are doing now matters less if you can’t carry on doing it. 

An engine is capital that earns (on average) more than you spend (on average). As soon as that balance of consumption and creativity changes, the clock starts ticking. 

If money can sustainably make money, and we can spend less than the money sustainably makes... there is no reason that can’t carry on forever. If the sustainability is cared for. 

For money to make money, you need to ask very pragmatic questions. 

How is money made? What is wanted? Where is the scarcity? What are the skills and knowledge needed for those specific requirements? Are too many people already working on those problems? How are decisions made? What are the containers those decisions are being made in? What are the barriers to entry? What are the barriers to exit? What frameworks of understanding and action are we using? How are we communicating? What agreements do we have? 

You can only be freed from the constraints of these questions if you have control of the balance between money coming in, and money going out.



Wednesday, January 19, 2022

50-15-5-Rule

Money can make money. 

A path to freeing yourself from being a productive asset is the 50-15-5-Rule. If you have an income stream because YOU are a productive asset being paid for your work, and you have capacity to gain significant control over your expenses, you can apply this rule. 

It starts by not consuming everything you produce. 

If you can invest half (50%) every year, for 15 years, and your money makes 5% real return (paid $5 for each $100 that works, AFTER all expenses and inflation)… then your capital can grow to the point where your money makes as much money as you were spending. 

These are aggressive assumptions. Investing half is hard. 15 years is long. 5% is proper work for proper money. 

All that said... it is possible to get to the point where you have an engine. 

An engine is capital that (on average), earns more than you spend (on average). 

If you sustainably spend less than your money sustainably earns, then you are no longer bound by the constraints of money on how you spend your time and energy.

Tuesday, January 18, 2022

Releasing Tension

You can over-extend metaphors. When you care about something, you can see analogies in everything else. Meaning comes through connection. 

It may strike many as a misuse of the words when I talk about Financial Yoga. Money is something a lot of yogis would say they don’t care about. 

The reality is money is something that can control you, if you don’t control it. You can’t opt-out of the world of money any more than Arjuna could opt out of war in the Bhagavad Gita. 

Lots of people aim to do what they love when they grow up. My choice was more pragmatic. I studied money partly because I hated money fights and the souring effect of money anxiety on the things that are valuable beyond the weighing and counting of price. 

When you realise that money can make money, and you are in a position to build financial breathing space, you can start on a path that releases you from being forced to allocate your time and energy to money-making. You can practice focusing on the things that really matter, but don’t meet the constraints of money-making. 

That starts with releasing tension. Releasing tension starts with seeing where you are holding it.