About
Background
I have worked in the UK equity market for four decades, I have met and interacted with all types of investors. I have met countless companies and read widely on different investment topics. I have invested in a variety of companies and implemented differing strategies, sometimes successfully, other times disastrously. I am now looking to use my experience, knowledge and world view to make better decisions about my own investments. I would also like to help other investors and companies to make better decisions about the world we inhabit, to learn and disseminate new ideas, avoid unnecessary risk and hopefully to help keep a positive perspective on what at times appears to be a chaotic and dysfunctional place.
Philosophy
As an undergraduate studying economics in the late 1970's it was an exciting time for ideas of economic individualism and self reliance as espoused by Hayek and Friedman, ideas that were starting to be put into political effect by Ronald Reagan and Margaret Thatcher. By the end of the 1980's the collapse of the Berlin Wall and the dismantling of the Soviet Union seemed to vindicate these views. There was speculation that we had reached the end of history. However, the reality was that the hubris of liberal democracy’s success had profound consequences, with which today we are still contending.
While Hayek’s most popular book, The Road to Serfdom spelt out the pitfalls of big government and consequences of economic planning, it was his essay, The Uses of Knowledge in Society, that struck me as the most convincing argument for the inability of a centralised planned economy to solve the fundamental economic problem (being how to allocate finite resources among competing infinite wants and desires). He saw it as a data processing problem.
Hayek’s argument rested on the fragmented and dispersed nature of knowledge among the participants in an economy that made the technical calculus of planning impossible, and attempts to do so doomed to failure. It was an essay in support of the price mechanism and spontaneous order in society. His writings from the 1940's seemed to nail it in the 1980's.
The reality is that since then the role of data, computing power and ubiquitous networked communications have changed the fundamental structure of our world and have delivered previously unforeseen consequences. We are now living at a time when data is the new oil, AI and quantum computing are becoming a reality, the post WWII rules of the World order from the Breton Woods agreement, the role of Central Banks and the soundness of our money have all been undermined or called into question. Western democracies seem unable to deal with the consequences of the rise of China, and even the certainties of financial theory, that markets tend towards equilibrium and efficiency, and that asset prices revert to a mean, are ideas that have been cast into serious doubt.
Our reality has become hypernormal, in the sense that increasing numbers of people do not believe it is sustainable but are unwilling or unable to say so. This radically alters the nature of risk that we face as investors. I will consider 10 Lessons of Investment that I have learnt, and over the coming posts I will try and weave them into events as they relate to investing in equities and the preservation of wealth in the decade ahead.
10 Lessons of Investment
The following are the main lessons I have taken away from four decades of working in the equity market and following the world of investment.
- Get Real Asset Protection
- Pricing Power Matters
- Innovation is Difficult
- Success is Often Oblique
- Data Delivers Advantage
- Skin in the Game Mitigates Risk
- You Can’t Rely on Mean Reversion
- Compounding is Powerful
- Debt is Dangerous
- Buy & Hold