For the past few weeks, I have been putting together the business plan of sorts for Paper Street Capital. Essentially, this boils down to is asking at what value do I think my current positions could be, where they should be sold, then (after taxes) does everything flow? It was an enlightening exercise more in that it recalled a few larger principles I picked up in some great books over the past couple of years.
First off, the two books I’m going to reference heavily throughout are the following:
The Psychology of Money by Morgan Housel
This is by far my favorite finance book, and my most recommended book overall. Morgan is an excellent writer and moreover the subject matter can be life changing.
What started as a quick recommendation I saw on Twitter, ended up being an enlightening and useful peek into the “actual” planning and extensive maintenance involved for the ultra wealthy.
What is Enough?
In Chapter 3 of Morgan’s Book titled “Never Enough”, he quotes the late John Bogle on a story he would frequently tell about “enough”:
At a party given by a billionaire on Shelter Island, the late Kurt Vonnegut informs his pal, the author Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch 22 over its whole history. Heller responds, “Yes, but I have something he will never have . . . Enough.”
This came to mind when planning out the potential of some of my holdings, especially in the nascent crypto space. I’m interested in the space for all of its potential, the feeling of a new frontier and a technology that has embedded within it so much promise. Along with that though, comes the other side of the Wild West, the scammers, con artists and carnival barkers. Its part of the territory as the space matures, and its an element that I’ve come to accept in the short term. In conjunction with the circus, is the outlandishly rosy outlooks on whatever “projects” you happen to own, all from the friendly Twitter users that you didn’t mind in the good times, but find them very tiresome now.
Its part of the reason I’ve been spending so much time on trying to develop some valuation techniques for areas that show true business model promise. In short, taking a more sober and considered approach to the space is what I believe to be my path forward to truly successful investing here. That includes attempting to balance the promise of the space with the reality of its implementation. A good example of such a reality check came in the form of the recent regulatory threats from the SEC. Nothing quite calms everyone down like the threat of being completely shut out of the financial system. (I’ll have more on that in another post, my likely unpopular opinion is that the SEC isn’t out to end crypto, as I believe they are actually aligned with growing the space.)
Yet whether I take those super rosy projections and run with those, or even the more measured approach, it still generally can mean sums that I may not fully comprehend.
Referencing Morgan’s book again, in the same chapter, he discusses the two paths taken by the founders of Mcdonald’s. The original founding brothers were (roughly) bought out by Ray Croc, who in turn grew it into one of the world’s most valuable companies. Many would look at the brothers, who took a relatively paltry sum to the billions that resulted, and think… man, what a mistake. Yet as Morgan highlights, at the time the money made by the brothers was in excess of anyone could dream, and more than adequate to live a very comfortable life. Further, they exhibited the principle of enough.
On the other end of the question of enough, is the reality of the lives of those who never seem to have enough. That is where the second book, “Wealth, Actually” was incredibly insightful. In essence, its written by a wealth manager for the ultra-wealthy, and written for that audience. Meaning, it walks through all the various aspects of the complications, planning and pitfalls of that level of wealth. Its an interesting read, yet I left it with a feeling that I’m sure most would share: I don’t envy that life at all.
(One quick thing I did take away that was really helpful and applicable: Viewing housing as consumption rather than investment.)
It seemed to me that most of the book highlighted all of the paths in which lives can be ruined, and attempts to mitigate such disasters. I struggled to find a positive that I can’t already manifest in my life at my current financial standing. The overarching takeaway for me was that extreme wealth inevitably ruins people. The gravity that we all need to be healthy and thrive gets turned off at a certain level, and from a comical sense can disconnect you from reality:
Further, the darker side of extreme wealth is the rot that can creep into those who were born into it, or those seeking to exploit it from those who built it. The book entailed all the various ways in which families break apart, divorce after divorce, children growing up with absent parents all too focused on making “more”, drugs, yachts, suicides and mental illnesses, all in multiple houses around the world. It all felt so tragic to me. The answer personally, it seemed, was to carefully consider what is enough in my own scope. I’ve come to view money more as electricity. Its a tool that can be used for substantial good, yet too much all at once can kill you, the same as too little. Its a tool that requires a large degree of respect, and for most the skill to master it takes time.
So in returning to Mr. Bogle, as the resulting projections fluctuated, I kept landing at a similar question:
How much is enough?
Its a question that dominos it’s way through all facets of your life, down to the core issue, which is:
What do you value?
So what follows is my thought process on what I value, why I invest and what in the world is enough? This will hopefully be useful for the future me to look back on and prevent the seemingly inevitable “moving of the financial goalposts”. From Page 37 of Morgan’s book:
The hardest financial skill is to get the goalposts to stop moving
What Do I Value?
As I headed out on a long mountain walk this morning, I wanted to think deeply on that question.
I’ve found I have the gift of focus, an ability to grab onto something follow it intensely. The best illustration would be a light; I really enjoy following the “light of interest” while all else can easily fade into the dark background. The only downside I see is I become disinterested in things that I likely should be doing more of, like traveling. Yet a part of it doesn’t feel like I’m in control, and I’m not fully sure where those “lights” originate, but I love following them down the rabbit hole.
Its difficult to articulate, but what I’m genuinely interested in is building the life I want, which for the most part comes in the form of investing. I wish there were a more concise way of saying it, like an interest in “rock climbing” or “hiking”, but although “life-building” doesn’t quite land as easily, its true. You show what you value by your actions, and I tend to spend most of my time reading, thinking or seeking good investments. Yet its not the money that I value, but time:
I Value Time
What I value most is the everyday time with loved ones, friends, in good peace of mind, in good health and never in a rush. I couldn’t understand why things like a voicemail of “call me immediately” bothered me so much until I viewed it through this frame, it was an urgent and unsolicited claim on my time, and I valued that greatly. To be clear, that doesn’t apply to friends and family. I aim to be always available to a small subgroup of people in my life, while building the luxury of allowing everyone else to wait.
More importantly, embodied within time is both the ability to spend it as I see fit, while also realizing the pernicious fact of time itself:
Lost time can’t be rebought, while lost money can be reclaimed.
I value time because I value things in life that money can’t buy. The preciousness of life comes in the everyday, the innocuous moments in a season of life that you always cherish in your heart. As hard as we try, we can’t fully replicate it, nor should we. Today is always an opportunity to make future memories. That’s why I get burned out on all the remakes of movies and video games, trying to capitalize on the nostalgia effect. Maybe its a sign that we’re seeking more meaning in our lives today, or a blindness that we are living at a time that we may look back on with yearning.
Money in that sense, is only a tool in which to create an environment where the soil is fertile for the good things in life. Its a garden for the eternal gifts if you will (Matthew 6:19-21). Its why I looked at the lives of the uber wealthy with a sense of tragedy, the stories of the fractured lives, of those deciding whether to put their car collection into a museum for tax purposes, so that the fourth wife won’t sell them all. What do you do at the end of that road with all the money in the world?
However, that’s not my path. As I walked, I simply asked what I value by virtue of what I do. I’m in the North Carolina mountains for a few days because its a place that I find immense beauty and peace. Further, I aim to invest in such a way that provides ample opportunity to come and go here as I choose. Money here can only buy the opportunity to do this, not the beauty and peace itself.
More importantly, when spending time with friends and family, I’ve learned how meaningful those moments are, primarily due to their brevity. I’m fortunate in that sense, I really enjoy my family and close friends. Thing is, the best moments in life happen innocuously, and they’re very difficult to replicate given the magic of the moment is due to the specific nature of that time. To illustrate the point, remember that everyone there, including you, are a certain age and stage of life. Whether its major holidays or just a simple day of the week, its only a brief window, and if you’re not present, its forever missed.
Same goes for friends, what can feel like things will never change, invariably do and suddenly you realize you haven’t seen them in years. That “busy-ness” is what I invest to control and remove. There’s vast utility and purpose in work, yet a part of the responsibility is a balance and focus on why in the world you’re doing all of it. That added to the sense of tragedy of the lives of the uber wealthy, it was decades of dedication to a “career” for untold sums of money to then sacrifice virtually all of their lives for status and stuff:
“We buy things we don't need, with money we don't have, to impress people we don't like.”
― Chuck Palahniuk, Fight Club
What helps me with discovering “enough” is not being interested in the status games. I live in a swanky part of Atlanta that I’m fortunate to call home. A part of the territory is watching the “Buckhead Bettys” play the status games. Its been extremely useful to have the juxtaposition of that rat race with what I value. Not to bemoan the complicated lives of those I don’t know or fully understand, but its important to watch some place extreme value on their position relative to others. Status is a never-ending siren song of accruing more and more in a world of entropy. There doesn’t seem to be any winners, all in a zero-sum game. As comedian Owen Benjamin once put it:
More money is just the same problems with a higher thread count
I Value Peace of Mind
In conjunction with time, comes the added benefit of peace of mind. I find that when I feel like I’m sacrificing this, it takes all of the joy out of my day. Further, a few nights of lost sleep over something I genuinely dislike is enough for me to find a way to remove those obstacles to rest. Some of that is just part of life, but I seek to invest in a way that prohibits those weeds from growing. Peace of mind is something I value because I struggle to see where its worth sacrificing. This is an everyday choice that relies on stacking good choices to achieve. It may mean saying no more often, especially to things you may enjoy in the short term, for a long-term benefit. Many of those “No’s” may come in the form of potential financial upside.
Money here is just a means to remove what used to be “emergencies” to mere inconveniences. Along those lines, too much money reintroduces problems that sap the environment for peace of mind, which is where “enough” comes into play. I see it as a bell-curve of sorts, in which there is an optimal balance at the top, but the more money then turns the curve downward and becomes an inhibition to a good life in itself.
I’m convinced that to be a healthy person, there’s a required level of stress and gravity. The goals of investing for me is to choose that stress. There will inevitably be times of chaos and stress that I don’t choose, thats life. Yet the ultimate goal isn’t to remove stress, but to choose it. Taking on difficult challenges, exercising courage, and fighting battles worth winning are all good choices. So the balance comes in the line in which too much peace of mind is sacrificed for something new, is it really worth it?
What is Enough?
Enough to me is to live a life full of the things I value, to a limit that it doesn’t sacrifice those same things for “more”, and which creates the best environment for all the goodness of life. A part of that is finding ways to help others who really need it, which can be the waterfall at the edge of your “enough” that fills other’s lives, whether in time or money. So as I planned out Paper Street Capital, I think I’m discovering what is enough, and hopefully I’m wise enough to see it.
A lyric from one of my favorite bands, The Ghost Inside, sums it up best:
My favorite things in life, aren’t even things at all
Nothing that drives my soul is even tangible
-”The Other Half”, The Ghost Inside
Will