“There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.” ~ J.K. Galbraith “A Short History of Financial Euphoria” 1990 (via “Mastering Market Cycles” ~ Howard Marks (Ch. XI))
“[Value Investing] is in actuality, a comprehensive investment philosophy, based on performing in-depth fundamental analysis, pursuing long-term investment results, resisting crowd psychology , and limiting risk.” Seth Klarman, Introduction to Security Analysis 7th Edition 2023)
“You were born with the ability to decide what is and what isn’t in your best interest. Most of the time you will make the right decision and take the appropriate actions, and in thinking for yourself, you will become far more successful than had you gone against your own judgement.” ~ Jim Rogers - A Gift to my Children (2009)
Source: https://www.123rf.com/profile_mankapook
Dear D—,
I appreciated your sharing your thoughts with me on the subject of your career plan on your recent visit to us in Ireland. I enjoyed hearing about the financial planning and investment company you are about to join and am intrigued that despite pursuing a degree in engineering, you have decided that you will find a more congenial and rewarding path in the financial services industry than in the more usual options taken by fledgling engineers. Whether that is a good thing or not, I have no idea - you seem to have chosen the company because of your admiration for the energy and integrity of the man who will be your boss and that is a good enough reason to start anywhere. Your choice of the person under whose authority you begin your career is so important: the difference between a great manager and a crappy one can make a huge difference in the arc and quality of your future trajectory and whilst I would never seek to influence which path my own children chose to take, I have tried to ensure that their initial experiences have been with outstanding companies run by leaders with high scores of integrity and stewardship. The Small Giants Community has been a boon in that regard.
You mentioned that the company you will begin working for in September is also on a mission to improve financial intelligence and literacy for children at school. That is a noble mission and one that resonates deeply with me, as it does with the broader community of people across the globe whether they be investors, financial advisors, wealth managers or from any of the many different niches in the financial services market. Those of us who know our onions and have spent our careers figuring out, putting into practice and communicating the fundamental principles of financial intelligence, know how dire the general level of competence in matters financial is across all sections of the public and recognise how miserably children are prepared for life as economic subjects in the notionally free market world in which they will have to compete for jobs and manage their resources.
I mentioned to you that once you start engaging with the fundamental principles of money and personal financial management, you move quickly - nolens volens - to politics and a political frame of reference because pretty much every aspect of import that affects money comes down to choices made at a political level - from inflation (which impacts the value of savings) to taxes (both as the primary expense category to be managed and in the incentives that explicitly direct private capital) to regulations, the banking environment, governance and the myriad rules, interdictions and proscriptions that determine how capital flows within an economy and who gets to keep what. You cannot help but take a position on these things and whilst it was not my intention to overwhelm you with complexity just as you are starting to discover your enthusiasm for the subject, I thought it fair to warn you that sooner rather than later you will need to start forming your own opinion on the subjects because finance never exists in a vacuum.
But it does exist in the context of a rich history. As far as I am concerned success in deploying irreplaceable capital is as much about pattern recognition from the cycles of market history as it is about security analysis and investment maths. Understanding the strong tidal forces and their origins as well as developing a robust sense of where at any point in time you find yourself in the current cycle is a crucial component of any financial education. Reading history of previous manias, panics and speculative bubbles and their burstings makes for entertaining and instructive homework. I recommend Alexander Chancellor‘s 1998 compilation of speculative manias „Devil Take the Hindmost“ as a wonderful place to start that genre.
Our conversation quickly moved onto the question of what the point of the whole exercise of studying, picking a career and then getting a job was. You were rightly questioning the purpose behind it all, prompted by your observation that so many of your fellow students were entirely uninterested in understanding issues arising from personal finance and whose ambition seemed limited to securing a job at a “too-big-to-fail” company like Siemens or in continuing with an academic career that would eventually see them tenured or on a pre-determined government-guaranteed public service payroll and set for life. You would probably discover large swathes of students outside of the engineering faculty for whom even that career path was too “capitalistic” and whose expectations of being looked after by the State in perpetuity were quite well-developed. But that is for another conversation.
My advice to you based on what I know of you and your friendship with James [n.b. my eldest son] was and after a few days of reflection is even more strongly that you are both highly motivated to live a self-determined life and should organise everything you do in support of that ambition. You asked me to flesh that out and this letter to you is a regurgitation of the framework we evolved during our conversation in which we ended up with three elements that build on each other in constructing that self-determined existance. I thought it might be helpful to describe those again to see if they can stand up to being captured in prose and under the stark glare of a white background and typeface. In the congenial atmosphere of the Firehouse Bakery in Wicklow everything sounds plausible and vaguely wise.
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