So what is investing and what’s an investment?
I would think that, most academic will probably agree that, an investment – or investing – is a process that has an element of gamble in it. The hope is that you make a lot more than you put in, but then there’s is always a possibility where you may end up with less, and therefore, a net loss from where you started.
Financial markets are quite clearly disconnected with ground realities, and complex algorithms now pretty much dominate the trading decisions. And the high volume of trades executed by machines can be overwhelming. As models and algorithms get more complex, the markets will get even more complex. Making it difficult for money mangers to allocate capital based on old rules, and the understanding of the markets. Also the new generation of couch investors and sofa investment advisers with the help of influencers are attracting capita in investment ideas and trends that might be counterintuitive to where traditional investors believe the market should be. The game is clearly evolving.
My own assessment is that, a very sizeable percentage of money managers especially those playing with the old rules of the game are starting to struggle, and therefore, no longer that good at allocating an important resource like money. And the miss-allocation of money as an important resource does create serious misalignment in the economy. But I know, people will continue to allocate capital based on trends and momentum. In short, market psychology is a key driving factor behind the movements in the market.
I must admit, I have struggled to find value in new ideas like Bitcoin for example. But then, I am probably the biggest idiot on the planet, so I tend to rely a lot on judgment when making decisions. Yes my judgment informs my decisions and is guided by data, and I always there is a good chance that I may end up holding the wrong end of the stick.
So relying on my judgement and informed by the data, I bought into Tesla last year immediately after the SEC debacle, and when Morgan Stanley and others were righting off Tesla. I saw people doubling on their short positions. And after deep diving into their thesis, I realised there is more than 85% chance of them wrong. Also after talking with a number of people I realised that, a number of trade positions were informed by bias and also to some extent prejudice. I held on to my position, and I did enjoy a good ride eventually getting out of Tesla in the second half of the year 2020. I know Tesla has gone on to become a $ 530 billion plus market cap business, but relying on my judgement which is informed by data, I don’t see that much upside in Tesla. So in my view staying invested in Tesla runs the risk of me losing out on possible gains and also causing a real miss-allocation of capital. I believe those gains post monetisation should be allocated efficiently. And that is what I did by investing in a business that we are building with a group of friends.
A business that has evolved from a fintech ecosystem to expand into a separate Edtech and Medtech ecosystems also, and we are already seeing the value propositions getting crystallised. But I know some of my cousins in the market will stay invested inTesla and may even buy more of Tesla, mostly because of the trend and momentum around the company. I am not at all making any judgement on their investment decisions, but I won’t be surprised if people shorting Tesla from here on will see their positions in-the-money.
Moving on from Tesla, quite frankly, I have never understood Bitcoin, but since the start of the pandemic, I decided to buy some. Again relying on my judgement. I could sense how eager and willing the new generation of investors were and still are on Bitcoins. I guess that’s one of the reasons why some traditional investors also bought into Bitcoin positions. They probably realised that bitcoin may have staying power. And after doing a bit of my own research I have realised that bitcoin will continue to be used to execute dodgy transactions. It will continue to attract people. But got out of it early November when I realised Vaccines are now becoming a reality. Also it was more of an education on how the entire infrastructure is designed, and quite frankly I am not confident that bitcoin is the future, because based on what my mind is able to foresee, in that reality bitcoin is dominated by other much smarter and better store of value products. So what am I trying to say here ?
Well! People will continue to come up their own narrative to help explain their positions, and they all make a good case for it. But I tend not to overwhelm my judgement and my decision making based on opinions and daily coverage of the markets, and I must say, I am not really missing out, not at all. Sometimes being detached works out better, and it has in my case. It helps me see things from a different perspective, so I don’t have to engross myself in the same reality as everyone trading the market find themselves in.
I love learning from nature, and I am in the awe of nature especially how nature allocates all its resources. So now I am trying to learn how best to allocate all of my resources, and this journey sort of helped me conceived an ecosystem approach to create, capture and distribute continuous value, and then redistribute that value all across the value chain including the society at large.
I remember when I started my career in the world of finance, I was told by my colleagues that there may not be a bigger company than Microsoft, also I was told Amazon won’t work, but it did. The point I am trying to make here is, none of us know everything, and even with two masters degree and a MBA, I know I don’t really know much. Sometimes I do wonder, how stupid can I be?
So I don’t discuss my investment strategy or business etc with most people, I never have. But I do have a habit of sharing my thought process in my blog, and I don’t ever worry about, how rubbish it might be. It is what it is. I guess we are all on our own journey, and from where I am today, I do sense that financial markets and the economy needs reinventing.
I know I can’t go on a rant about my misgivings with how the flawed the current design of the economy is, but yes I can try my best to do things differently. I do want to create value, but value that will benefit real people, because markets have failed 80 +% of the global human society, and I am really ashamed of it.
I see arrogance, and I have seen ego. I have also seen how discriminatory I can get at times. And sometimes I can be a real hypocrite. So I am trying to solve myself everyday without a care in the world for opinions or reactions, because I know I will die one day, and that day will be the end of everything. I hope, I can become the best version of myself everyday, it’s a process of trial & error. But I don’t obsess with myself or the markets, and I don’t for a second think that markets know everything, or that it has the best interest of people or the society at large. And I am not promoting socialism here, not at all.
Nature isn’t socialist. As I see it, nature is the best capitalist that there is, and I am probably the biggest idiot there is, and that is my operating model for myself. I just hope my cousins who are money managers will try to learn from nature also, and realise that money is a very important resource especially now because of how we have designed our modern society, and miss-allocation of money as a resource can create serious problems, and we are already in the middle of it.
There will be a tsunami of poverty across the global human, all thanks to the ongoing pandemic. Even with a vaccine, a sizeable percentage of the global human population will find itself struggling quite badly just to survive. And if we continue to ignore these people then I am afraid, there is very little real use and utility of financial markets.
Whenever you are investing in a company, you are also indirectly investing in people behind those companies. It is people who create companies, and through their ideas, and obviously hard work, wealth and value that investors as shareholders of the companies tend to chase. It is people who create a Tesla or Bitcoin, and when money managers are investing their investors capital in businesses , they are basically backing a group of people or a business leader leading those companies. So ultimately, we are all investors in people without realising it, aren’t we ?
By investing your money, you are also investing your self in people. There is no one versus the other really. The utility of money is to create more money and wealth, but value and values can be a determining factor.