29 April 2006

Advice to a Young Elite

I am currently on the World’s Favourite airline heading to London and onwards to Miami.

It was a very useful week in Scotland and the JV keeps rolling along. We had an open board meeting and ran through a lot of the items that I wrote about in my finance oriented pieces. The BOS lads are very switched on. When they are being tough on us, they know it! We had an honest chat about why they are being tough on us. By sitting down and talking about everything openly, we realised the logic behind their positions – all of which seemed far more reasonable than what we were dreaming up in the absence of communication.

Some of you had follow-up questions, tips and advice stemming from my last few entries. Responding is a bit down my list as I want to finish off sharing my Kona ideas.

On to our topic…

Over the last six years, I’ve helped a few elite athletes through a mixture of coaching, training and financial support. It hasn’t been charity (not even close) as I benefited through training partners, technical instruction and companionship. Helping people can be a tricky business but I’d say that it’s worked about 70% of the timen (my batting average is improving since I last wrote about this!). That’s a pretty good hit rate in my view.

I’ve also learned a few things about how best for me to play it: (a) clear expectations; (b) high standards; (c) open communication; (d) my way or the highway (if you are living under my roof); and (e) mutual respect. When I’ve tried to “be nice”, or compromise my expectations then it hasn’t worked as well.

Spring is here and summer will follow soon. Most elites (most people for that matter) will follow the same pattern in 2006 that they have created over the last few years. They can be beaten!

What follows is some advice having watched the progress (but mainly the lack of progress) of various elite athletes and neo-pros over the last six years.

For ten months of the year, your #1 priority is your training and everything that enables you to do your training. You will not improve without consistent, focused training. A lot of athletes are great at being “hard” in public – that’s NOT what it is about. Where the great athletes move ahead is by being consistent and focused in private.

Your natural talent will get you to a point – to move beyond that, to breakthrough, you need a consistent, focused total athlete approach – when nobody is watching.

The role of an athlete is not to travel the world chasing races depleting limited financial resources. Until you can crush everyone at all your local events, stay in one place and train consistently. Otherwise you are fooling yourself and merely living a triathlon vacation. Seasonal migration is useful but only to improve the quality of your training – seeing young pros drop three months spending money to DNF or detonate in Kona strikes me as ridiculous. Get out there and win a hot weather Ironman first.

With your training, search for a training partner that shares your approach to fitness. These people are invaluable. Also ensure that this person has an attitude and character that you respect – you will spend a lot of time with them. As a result, they will impact the way you think, so choose wisely.

With your coaches and mentors – look beyond results, look to the life that they actually lead outside of their sport. Is this the life that you want for yourself? This is a fundamental consideration because what you actually learn from mentors (consciously or unconsciously) is the life skills that you’ll carry with you for the rest of your life. Choose wisely.

If you happen to make it to the top, what next? At some stage, you will have to consider life beyond actively competing. This is where the best coaches/mentors will provide real assistance.

As they say: ‘There is a leisure class at both ends of the socioeconomic ladder”.

The alternative employment choice for most of your competition is retail sales, massage therapy, bike maintenance or personal training. Training all day is an attractive alternative.

Bear in mind that civilians work for a living. You are incredibly lucky to have the opportunity to give-it-a-shot. It amazes me when I listen/read to athletes (and their supporters) talking about “how hard it is” for Dude to make ends meet as a triathlete. No kidding! Dude is typically a 9:08 IMer and about 125th in the world. Society doesn’t owe him the right to go on vacation. Entitlement mentalities leave me shaking my head.

Your #1 medium term goal is to achieve cash flow breakeven. Give yourself three years to figure out: (a) are you well suited to elite athletics; and (b) are you going to be able to have a decent quality of life. Assuming that you start as a top agegroup athlete, then after three years of living-the-dream you should have an idea about what further progress is going to entail.

What is breakeven? Supporting yourself completely from your own efforts. I’d strip out cash used from: spouse; parents, personal savings; sugar daddy (or mommy); and other unearned sources.

Now if you happen to have three years worth of cash flow in the bank then that is a clear advantage but you’d better be sure you want to use it because triathlon is a low pay vocation!

Financial stress is like any other – it distracts, reduces energy levels and makes you less effective at achieving your goals. However… it can be a great motivator when used appropriately.

Summing Up
You might notice that I didn’t talk about winning races, getting fast, hammering yourself or any of the other things that a young elite might consider being important. That’s because I don’t think that they really matter all that much.

Where I would spend my time is…

*** building my aerobic engine, improving skills, enhancing flexibility and learning personal limiters;
*** associating with people that use sport to create a satisfying life; and
*** improving my ability to support myself over the long haul.

Ultimately those are the items that will lead to success (or prevent roadblocks) over the ten years that it will take for you to achieve your athletic potential.

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25 April 2006

Hot Stuff

I thought that I’d share some ideas on training in the heat. I’m currently back on BA, above the Rockies and far removed from the heat and humidity of the Big Island.

I really enjoyed my training camp there and know that it added materially to both my fitness and my knowledge. That island is a neat place – there is a groove that you need to find in order to train well. Of course, we found our groove a little differently than Peter does. We had a condo in Keauhou and a guest pass at the Hualalai Four Seasons spa. That made a huge difference.

Peter living up high makes a lot of sense to me but I doubt they have high speed internet up there so it really isn’t practical when you need to stay in touch. If you are doing an “eat, sleep, train” gig then the commute wouldn’t be an issue and (without central aircon) you’d certainly sleep better up high. I haven’t tried that in Hawaii but if I was true iron-monk then it would have certain appeal for me. Heck, just because Peter does it, there is appeal for me.

I kicked off my training camp with an Olympic distance race. I didn’t swim or bike particularly memorably but I ran great and that must have made me feel a bit bulletproof when it came time to start “training” again. As well, by not gaining a stack of weight last year (when I wasn’t training), I am in the fortunate position at spending most of my time training very close to race weight. It is a HUGE advantage in a lot of ways. The greatest is that it reduces the stress on me because I don’t have to seek to trim down while training stress is high. In fact, I can eat a little bit extra and avoid the risk of depletion training – one of the easiest and most common ways to nuke ourselves.

Anyhow, my first big day was a decent swim followed by a big ride through the Kohala Mountains. I completely nuked myself and wasn’t able to hold anything down from Noon until 6am the following day – threw the entire contents of my stomach up three or four times. It was a bit embarrassing! My stomach completely shut down and things piled up until I threw up. Even after getting sick, I think that my electrolytes where whacked at I kept throwing up until I settled the following day.

Now I could blame my sports drink…
Or my electrolyte caps…
Or the brand of my sports nutrition…
Or the water that they were serving on the course…

However, I think that answer was a lot simpler. I ate too much, went too hard and blew myself to bits. With 90F temps in Tempe, I am sure that a few folks experienced the same thing as me that weekend.

M saw my issue immediately and recommended that I scale my morning intake way back. So I had to make some material adjustments to my nutritional timing. Normally, I like to front end load the bulk of my nutrition. In the heat, I wasn’t able to do that.

Breakfast was pretty similar most mornings – two cups cooked quinoa mixed with four eggs. That was served with a cup of strong coffee. I’m guessing that was probably 50-65% of what I would normally take in and 40% of what I ate the morning that I was sick.

Dave Scott recommends that athletes consider liquid nutrition when racing IM – I’ve tried that but I’ll usually eat a full breakfast on top of that as well. In Kona, I think that the liquid breakfast is a great idea.

As well, I think that highly efficient athletes (like Dave) enjoy a material performance benefit in Hawaii where processing calories is so tough. If you are a big, cold weather powerhouse then you might not be able to process enough to keep yourself rolling – probably best to lean out or stick to cold weather races. Even if you can do it on the bike in training, can you do it trying to stay close to Faris in the water then riding hard up/down Kuakini?

On the bright side, I’ve found that nutrition and hydration are highly trainable. So if it really matters to you then you could come and get a bunk beside Peter. However, most people aren’t willing to do that – and it’s pretty tough to beat an experienced guy that’s willing to do everything (just about year round) to beat you.

When training, I consumed less calories than normal. Sports drinks and gels gave me the bulk of my calories. When I thought that I needed more nutrition than that, I would stop, sit down and eat some real food (while not training). That worked much better and, once adopted, my stomach didn’t give me any more issues. I also used some electrolyte caps but, probably, more for insurance than anything else. I wasn’t particularly well acclimatized upon arrival and wanted to make sure that I didn’t deplete myself too badly. I also supplemented with magnesium each morning.

I’d do all of the above (minus the stopping and eating) if I was racing Hawaii here in October. I came to realise that some of the spectacular blow-ups that we witness each October could simply be too much early food combined with excessive early intensity. It appears to me that (for the guys) unless you are the fittest guy on the planet then going a bit too hard is unavoidable if you want to win, most years. Why? Because you are seeking to optimize your performance within a group of athletes that are following a sub-optimal strategy.

That is a fundamental point about Ironman pacing – there is a lot of social proof available on the swim and the bike that you are going too easy. This social proof comes from nearly everyone self-detonating. If your only experience in Ironman is the death march then you have no deep emotional understanding of the power of being able to run well. For your mind, it simply doesn’t exist. No matter how much I tell you about it, at a basic (animal) level, you won’t believe it until you’ve had the emotional experience. Most will never get there and that is a huge edge that some have.

More on this in a book called Deep Survival. An Ironman is the closest that many of us will come to a survival situation. It’s worth knowing how your mind is likely to react in these situations. Again, this is part of what I seek to program, and experience, in training. It’s probably also part of what Molina means when he talks about racing being a separate skill.

I also walked away very impressed with the athletes that have consistently performed well in Hawaii. The folks that armchair quarterback the elite performances each year should try this simple workout – I would be grateful if you could post this on your favourite internet board at 6am on October 22nd…

Wake up at 5am, eat breakfast and at 6am run to/from the Energy Lab at an easy pace – probably 9 minute miles for most of the critics. Mark and Dave held 6s starting a bit past Noon having smoked the swim/bike. That blows my mind.

In terms of pacing in tropical heat, I had an interesting workout at the end of my stay. Presumably after three weeks (and plenty of training) here I was reasonably well acclimatized. I did five intervals of varying length on the Queen K. I was holding Olympic distance race effort – moderately hard to hard in my lingo. Easy to do when you are in reasonable shape.

I found that my heart rate was about ten beats above normal but it felt pretty easy as I’d had two maintenance days before this session. I imagined how it would feel to go 5% harder when surrounded by the fittest athletes on the planet and completely fresh. Most likely even easier.

Following the main set, I was holding 50-65% of my threshold wattage but my heart rate was at a “cold climate” level equal to 85% of threshold wattage. In other words, I was generating “easy pace” power with “Half IM” race heart rates – not exactly spectacular! It took a ten minute break at a Chevron station for my heart rate to get back to normal.

The main set wasn’t all that demanding either. The total probably worked out to 45-50 minutes worth of just under threshold work.

The lesson for me is that hot weather pacing errors as far more costly than where the majority of us train. Combine that with a “World Champs” atmosphere and it is easy for me to see why each year the bulk of the top male contenders are done before they ever get to the run.

Even if you train in the heat – it’s different in Hawaii. There’s something unique about the combination of the heat, the wind, the lava, the tarmac… it all adds up. I’ll be pretty cautious the next time I race here.


Finally, how did I make up the calorie deficit from less early day and training eating?

Liquid recovery calories (sports nutrition, rather than beer) and high quality burgers! The Residents Beach Club at Hualalai has an amazing bacon, mushroom, cheese burger. It costs fifteen bucks but the view is fantastic. I think I averaged two per week.



A couple other ideas that hit me overnight as I snoozed across the Atlantic.

Intensity – it is very easy to convince one’s self that it is OK to ride/run “one level higher” due to the heat. Personally, I think that this is a mistake. What I was doing with my own training was giving myself a 3-5 bpm cushion in terms of HR zones. Typically, I’ll train at the bottom of all my zones (steady and mod-hard mainly). In Hawaii, I was training 3-5 bpm above the bottom, accepting a lower wattage/pace and remaining outside of my grey zone. To train the higher end of my power/pace profile I would add some mod-hard at the _end_ of my longest training sessions. For long course racing, this approach greatly enhances endurance when moving back to a more temperate race environment. Constantly holding back involves a level of faith (and self-belief) that is challenging at times (but great training for race day).

Tempo – similarly, it is possible and (even more) tempting to make nearly all endurance training a tempo session (when tested by heart rate). I see this quite a bit in reviewing many (most?) athletes’ plans, not just in the heat. Psychologically, we see that we are working “harder” and therefore assume that it is better. While you can get away with that for a couple (or even several) weeks in the heat, I think that it is a mistake. Training a “half gear” too high all the time leaves the athlete flat for key races. You’ll look like a rock star in training but you run the risk of your well being dry when it really matters. You will also be in for a surprise when you go past the seven hour mark on race day.

Hydration – a general observation that most athletes will be chronically dehydrated when transitioning to training in the heat. This results in extended recovery and increased muscle damage from training. In order to correct this situation (I spent my first 7-10 days dehydrated working this out), I needed to place water in my car, beside my bed and ensure a minimum of one liter per hour when riding, drink consistently for 3-6 hours after my long days and through my nights. Athletes that don’t like to stop during training or use depletion practices will find extended recovery as well as low long session quality.

Training Timing – start your key training as close to dawn as possible. We get enough heat stress without training in the middle of the day. All of my running routes were designed with access to fluids in mind and I had three one-liter bike bottles that I used on my bike.

Cooling – we stayed at a place with central air con and had access to a cold swimming pool. Completely eliminating heat stress at couple of times per day helped avoid the foggy feeling that builds up from constant heat stress.

Altitude – Coastal Hawaii is a hot, humid place but it is possible to do some riding at higher altitudes. Riding between 500-1,500 feet is, generally, cooler and subject to more cloud cover. If you do get yourself to the east side of the island, or above 2,000 feet then bring appropriate clothing. These areas are subject to a completely different climate than the lava fields.

Hope this helps,

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Global Liquidity

Part One starts below. This is Part Two.


Ever wonder what a guy thinks about when riding into a headwind for hours on end? Well, sometimes he thinks about global liquidity. My head is a strange place to be at times.

Where does money come from? Or most interestingly, what causes money to disappear rapidly?

If you have read a good book on the major drivers of global liquidity then please send me the details. I’m very interested in this topic.

When I started my finance career in the early 90s many of the major US lenders decided to close their European loan books – immediately, pretty much regardless of cost. There was a legacy of poor loan decisions, many teams were dismantled and the assets sold off. The fact that global markets are flush with easy money, on soft terms, has me wondering about the impact and timing of the next credit downswing.

Starting my career in London, the debt markets were very poor and we could barely make any deals work (not that I really knew how to make anything work back then). Thankfully, we didn’t have a lot of duds in the existing portfolio. However, the duds that we did have were under a lot of pressure. We lost quite a bit of additional capital supporting businesses and management teams, which ultimately failed. Collectively, following our money was a poor investment decision. There were a couple of exceptions but these only appeared once we had realised how much capital we were throwing away (and adjusted our refinancing pricing radically).

From the top down, we behaved like we were investing 100% of our own capital – rare within much of the financial services industry. This “emotional” attachment to the capital can work against you at times but, overall, is a big plus in my view. We learned from our mistakes and spread that information internationally throughout our group.

I was the absolute lowest guy on the totem pole and my team was highly conservative – at least half of us rank alongside the most conservative investors that I’ve ever known. Eventually, we started to get a few deals away that looked attractive to us. Others in the field were far more aggressive and we thought them to be a bit nuts. With the tail wind of a bull market and falling interest rates, we all made money.

In VC the rules of the game are stacked in the house’s favour with the partners taking 20% of the upside and the investors bearing the downside risk. There is isolation between funds and illiquidity for investors, so a couple of poor years don’t bring the whole thing crashing down. With hedge funds, the partners can make a lot more money sooner but with VC, the best firms are able to lock-in a stable long term income stream on top of the carried interest over future investment profits.

Anyhow, where is this going?

I’m quite fascinated by the credit cycle within various classes of assets as well as the drivers of global and regional liquidity. Having worked & lived many different places, this seems to be a key driver in short- and medium-term asset price fluctuations.

When there is a lot of liquidity around, times are very good for nimble financial investors. In the UK, we haven’t had a really bad credit squeeze since the early 90s. When I see lackluster consumption and increased government expenditure set against a background of increasing taxes and high personal leverage, I wonder it the cycle is set to swing against us. If that happens then it will be a good time to be liquid and/or have access to a well-funded investment vehicle.

I wonder what impact it has when a group of smart people think similarly.

I look around at certain deals that are getting funded and sense that actual returns are bound to disappoint. Once a bull market slows (or stops), leveraged long vehicles get hammered (in any asset class).

Within quality deals, I sense that actual returns could be 5-8% per annum lower than projected but outstanding when compared to how the asset class is going to perform over the next 5-8 years. Current expectations being unreasonably influenced by recent history.

I speak with investors about property sector return expectations and find many of them far out of line with long term historical real return performance. As an example, many institutions are targeting 15-20% per annum rates of real return from asset backed investments. You can play the game, or you can have a word with the smart people that are backing you and ask if they really believe the managers that show them those numbers. I’ve always felt that it is better to be open and conservative than to simply cook the model to show the desired result. Of course, that doesn’t exactly help when you are fundraising and competing against superior marketing horsepower.

Pushing for unrealistic return expectations has the impact of forcing good, conservative management teams to bump projections to the limit in order to get quality, lower risk deals approved. It’s tempting to think that you’ll end up with higher returns from higher expectations but I’m not so sure. We might simply be increasing the standard deviation.

Anyhow, I’m kicking all of this around because my current vehicle is proving a bit tough to invest at present – greed is dominating fear in the Scottish property sector and we’ve been out-bid on a number of deals in 2006. Having lived through this before, I think that is a good thing because the deals that we have locked up are going to be stars and (due to compounding effects) a good opening year provides an equity return platform that benefits the entire life of the vehicle. On the flip side, if you screw up your early investing then you are likely stuff for the entire vehicle life.

We are compensated on actual deals done (rather than capital committed), so our investors pay no penalty for the fact that we have plenty of additional capacity at present. It does create an interesting conflict for us in that we have a clear financial incentive to do any reasonable deal (via our management fee). However, we also have our personal capital at risk, the capital of most of our good friends as well as the capital of the man that got me started in finance. Personally, I have no interest in being associated with a mediocre investment vehicle. I’d much rather be small and highly profitable than large and average.

So that’s what I’ve been mulling over for much of April. It was interesting to be able to think at a location that is distant from the noise and influence of the market.


24 April 2006

Decisions & Choices

I am currently chilling in the waiting area at Los Angeles International. Not a bad place to kill eight hours. Monica wanted me to get a “day rate” at an airport hotel but $100 bucks for a shower seemed a bit extreme. Especially because I only left the condo a few hours ago – took the red-eye to get here.

Man-o-man I have a lot of stuff rattling around in my head. This seems to happen when I have an extended period of note writing. I seems like I have fifteen pages of stuff to get out. Well, a long layover is a good time to get it all down.

I’ve been working my way through a buddy’s business school book list. At least I think that is where the list came from as it seems like the sorts of books that I would want to be reading and discussing if I was at business school. My reading goes in phases with certain themes running through it. If I like a certain book then, typically, I read as much of the references/recommended reading that looks interesting to me. A few years back, I become interested in philosophy, history of the great religions and spirituality. Read a stack of classical texts and that was quite a bit of fun. Learned a lot about myself.

At the start of April, I felt so lucky to have the opportunity to read a lot. As the month progressed, I realised that it wasn’t so much the opportunity to read; rather it was the opportunity to think that I was enjoying so much. That’s probably why reading appeals so much. The book needs to be interpreted through me and by me. My own biases, filters and experience indicating how I perceive the text.

My theme has been (very broadly) behavioral psychology and decision patterns. It serves two purposes for me – in finance, I’ve become increasingly interested in how people make decisions – both how we make lousy decisions and how certain people/groups are able to make good decisions. Similarly, in sport, I’ve been wondering exactly the same thing. What are the factors that lead to people losing their heads? Why do certain people consistently make better decisions than others?

As well, I’ve been thinking about decisions versus choices. Decisions being key junctions/transitions/points that will have a material impact on our lives.

Things like:
***University choice
***Business school attendance
***Major investment purchase (house probably the largest for most of us)
***City we live in (many don’t consider)

I didn’t approach these thoughts primarily from a personal viewpoint. Rather, I’ve been thinking about it from an investment perspective. Why do some teams and individuals make better decisions than others? I’ve been fortunate to work with one individual that has made consistently good investment decisions over 20+ years. What can we learn from studying people that, on average, tend to get it right?

As for my own investing, I’ve probably been more lucky than smart. Just like having a couple of great deals early in a fund’s life, the biggest stroke of luck in my life was starting my career working for the best investor that I’ve ever known (call him Bob). That wasn’t a “decision” of mine as I needed a job. However, I did make the “choice” to work as hard as I could so that he’d keep me around.

Bob hired more outsiders than any person that I’ve ever come across. If you happened to see the movie, The Usual Suspects, then that is a good metaphor of what my first investment team looked like – I wish I had a photo because it is telling. We were six partners (three female), four nationalities and 75% of the team had worked internationally. Polar opposites of our main competitors.

Why did Bob hire such diversity? One of my recent books might argue that he had seen that better decisions would result from diversity. However, I think it was simply good commercial sense in that you often get “more” from hiring a good outsider. The biggest advantage being far better value and he loved getting a deal (people under market value, deals under market value, playing the game). So in seeking bargains on very bright people – he ended up with a powerfully diverse decision making team.

That interests me because most of the leaders and senior executives of the financial services industry are quite homogeneous in their background, outlook and training. As a group, that leaves the industry prone to making some big errors at times.

My personal portfolio is heavily in cash right now. I’ve been considering what to do with it. Pricing errors can lead to great entry prices – if you get your timing reasonably correct. In my view, if you wait to get it “right” then you wait too long – in VC we tended to sell a bit early and buy a bit late – shame we had to sell some of the best businesses at all, really.

So there is the search for return. There’s also the flip side… so long as you preserve capital in the down periods, you’ll do pretty well over the long term. How best to reduce my chances of a major error?

Great line from a recent read is that the best thing about investing our own capital is that we don’t _have_ to make any decision. We can simply keep looking at the pitches until we see one that we really like. With a brain, and society, that are hardwired for “action” I need constant reminding of that point.

There is a saying in the buy-out business that often the best decision is the deal that you didn’t do.

Bob’s currently raising a distressed debt fund. That brings me to my second major theme of my Hawaiian technology retreat…