25 May 2006

Educators, Mentors & Entrepreneurs

If you’ve been trying to access my board the last two days then you’ve probably noticed that it is out of action. I tried to resuscitate it; Tech Support tried to resuscitate it; and now we are on Plan C. Not sure if it will be back any time soon. If it completely gives up the ghost then I’ll shop around for something more stable and get it up during the summer. So there could be a few weeks without a daily fix on the board – probably a good thing for you, me and our employers.

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This topic has been kicking around in my head for the last two years. After my time in Asia, it became clear to me that everyone in the developed world has won the global lottery. Within these half a billion lottery winners, there are probably a half a million that won a further lottery. Lightning striking twice.

** Born in the Developed World;
** Male;
** White;
** Tall;
** Well dressed;
** Educated;
** Pleasant to look at;
** Sound of body; and
** Calm of mind.

If you have a background in social psychology or if you’ve read Cialdini’s book then you’ll see that the more boxes that you can tick off above, the greater your powers of persuasion over the world around you – in other words, the greater your ability to create your own reality.

It may not be convenient. It may not be fair. But there is a fair amount of research pointing that direction.

Why’s that important to recognize?

For me, it was important to recognize just how far the deck is stacked in my favour. Most of the people that I know that can tick-the-boxes above are pretty happy people. Why wouldn’t they be? Life’s been stacked in their favour pretty much from the get go. With that much of an edge, you’d have to actively work against yourself not to end up with a reasonable outcome. If you didn’t see it that way then (odds are) the persuaders of the modern consumption culture have moved your expectations out of whack. Dissatisfaction is largely driven by excessive “want” in our lives – whether want to become something other than what we are… or craving more and more possessions.

Back to my realization…

One of the most powerful things that you can instill in a person is hope. A little hope goes a long way – examples that I’ve come across over the last few years:

** Inner city youths risking their lives to earn minimum wage selling crack – hoping to make it big;

** The religious faith of millions of Filipinas working alone overseas to support a country that is prone to natural disasters and poor government;

** The large percentage of second- and third- tier elites in baseball, golf, triathlon and tennis. Not good enough to make a decent living but barely scraping by on the hope that they just might “get there”.

People will put up with a heck of a lot if they have hope. Likewise, revolutions happen once people have lost hope.

If you’ve been following the immigration debate in the US then this seems to be a consideration that you rarely hear mentioned. You could put the entire army on the Mexican border behind the Great Wall of America… if the people of Central and South America lose hope then what are you going to do when a few million vote with their feet (shoot them as per East Berlin?).

Hope, personal safety and successful economic management within Latin America are key issues to consider in formulating immigration strategy. Those are the factors that keep people at home. Personally, I get nervous when I see a peasant take over the presidency of a Latin American country. I fear for his country if he lacks the experience to sustain effective leadership.

Where am I heading with this?

Well, on the face of it, the ruling elite can appear to have the most to lose from “leveling the playing field” towards those at the lower end of a socioeconomic spectrum, the establishment often putting up the most resistance to change. However, elites always bear in mind that revolutions happen quite frequently throughout the world and if one wants to live atop a civil society, as opposed to an authoritarian society, then ceding on a few fronts could be in one’s long term interest. Besides, no matter how far you tilt things, the “lottery winners” have a structural and psychological edge.

The wisdom of the Champagne Socialists is becoming clearer to me.

Anyhow, at least in educational enrolment, that line of reasoning has led me to change my view in support of affirmative action. Once you are through the door, however, I don’t (yet?) see the need for double standards. Also, I wouldn’t compel privately funded educators to adjust their policies. I would seek to inform them on the diversity and social benefits to their institutions and communities, respectively

Off to meet KP for a coffee.

Part Two later.

14 May 2006

Who's In Charge?

Four or five years ago, I read a book called Consilience by Wilson – you can google “consilience wilson byrn” to read what I wrote back then.

The book touches on a wide range of topics but the two that have stuck with me:

a – genetic modes of expression: our genes determine who we are; nurture/environment impact us in determining the extent to which our preprogrammed traits are expressed.

b – free will: our brains are a sophisticated array; if you understand the inputs and biases then you’ll be able to predict thought/actions. We are far less “free” than we realise – many (most?) of us are prisoners of our programming.

The concept of a lack of free will can be a bit daunting. Many of us certainly pride ourselves on the control we are able to exert over our lives. Athletes honing our bodies; parents passing their “good traits” through spending time with their kids; and other areas.

As I’ve touched on earlier, I’ve been studying behavioural psychology because I want to make better decisions in my own life. To do that, I decided that I needed to understand how people generally make decisions. Some of you have asked for the titles of what I’ve been reading. Well here are a few to get you started.

** Fooled By Randomness, Taleb
** Influence, The Psychology of Persuasion, Cialdini
** Hedgehogging, Biggs
** Irrational Exuberance, 2nd Edition, Shiller
** How to win friends and influence people, Carnegie
** Deep Survival, Gonzales
** Collapse: How societies choose to fail or succeed, Diamond
** The Wisdom of Crowds, Surowiecki
** Freakonomics, Levitt & Dubner

All of the above were excellent on their own. Taking them together and viewing them through Wilson’s concepts made it even more evident to me that we make many decisions without thinking. We also make a lot of “poor” decisions. Even when we try to make good decisions, we are up against some strong automatic programming.

One of the clearest examples of automatic responses is people that get angry for no apparent reason. I’ve had a few (short term) training partners and (even shorter term) acquaintances that fit this profile.

Without exception – they:
** greatly underperform when stressed
** lack consistency in their approach to life
** wonder why progress is so difficult in their lives
** truly wish that they had better emotive control

Maybe they are stuck? However, my own experience is that while we’ve been dealt a certain hand, it is up to us to play the cards. Specifically, how our genetic traits are expressed will be based on the people/environment around us and our own actions (or inaction).

Even the most “unconscious” and belligerent people that I know have moments when they are clear, reasonable people.

Within these moments of clarity is where we must take action to note our nature and build patterns/reinforcing actions that help us head the direction that “we” want to go. I think the new age folks call this following our “true selves”. To me, it’s simply tapping into the moments where we are most sane and not running on autopilot.

The books above talk a lot about the nature of our autopilots. If you can’t see it in yourself then you’ll certainly be able to spot it those that are close to you.

When I notice the self-sabotaging traits in those close to me… I look within to see how I am doing the same thing to myself. Odds are, the people around us are quite similar to ourselves.

My success in athletics is built on making fewer mistakes than the guys that I am racing – errors in pacing, nutrition, training, intensity, preparation, race selection – the entire package. The further an athlete strays from an extremely dedicated process, with low attachment – the more space he creates for his competition.

In watching my own approach to athletics and seeing my blindspots within my sport – I have learned valuable personality insights that I can apply back to my finance and investing careers.

THE KEY – the patterns that we create in one area of our lives are likely to be found across ALL areas of our lives.

As a recreational athlete, the lowest stress project that you are managing is likely your athletic career. The patterns that you create in sport exist in your workplace; your home; your bedroom.

That is one of the best things about coaching adults – I don’t have to “teach” anything. My athletes and I learn a tremendous amount about ourselves from the endless case studies that each season provides.

With my highly motivated athletes – I help them practice relentless moderation with periods of goal specific overload.

It’s no different in business.

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Back to decision making…

Much of what I’ve done in my life (academics, finance, project management, athletics and coaching) involves making informed guesses with imperfect information.

While I work in finance, I don’t consider myself a professional investor in the classical sense. To me, the classical investor (the institutional investor) is running a portfolio and making daily decisions on asset allocation and specific purchases. I’ve never been attracted to that – possibly because it seems like a mugs game to me. Margins are low, as well.

When I was doing buy-outs, we’d make zero to four investments a year. Our record was pretty good but not surprising given that we had superior information; good people; and solid advisors. It was a time of limited competition, favourable economics and great returns. It was also a lot of fun – “buying” is something that nearly all people have in-built “joy” in doing.

People love to buy. Nobody every wants a bull run to end. Easy money is popular with the masses. Our decisions today are heavily weighted on our experience of the last three years.

Conversely, people HATE to lose, even a little. We find losses highly stressful. When under stress nearly all people will make poor initial decisions.

This is why I’ve decided to wait and see with my personal investing. I’ll probably miss out for a while but that’s OK. I plan on being around for a few more years, yet.

Next up, why I changed my mind on affirmative action.

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12 May 2006

Castles on the Sand

I’ve spent the last two weeks in Naples, Florida. In case you aren’t familiar with Naples, it is in the south west corner of the state. The old part of the city is beautiful and there are long white sand beaches on the Gulf Coast side.

This morning, I went for a spin around the best part of town, riding past what must have been $2 Billion of real estate assets. Beautiful landscaping and meticulously kept gardens made it a serene setting for an easy ride.

Having done a little market research on the top end of the local real estate market, I have noticed a large implied land premium that is built into high end properties down here. This struck me as risky given:

** Most of the properties lie between 3-7 feet above mean sea level;
** Naples is in the hurricane belt;
** Many of the best properties are built on sand bars and surrounded by water;
** Annual property overheads in a moist, warm, salty climate like Naples (air con, insurance, taxes, maintenance, gardening…) run between 1.5-2.25% of capital values;
** The local climate alternates between very dry and very wet – challenging conditions when you are built on sand with limited fresh water resources; and
** The medium term impact of global warming could make environmental factors more challenging over the next 15-25 years.

While the governor’s brother is in the White House, I imagine that the state has a get-out-of-jail free card. However, that’s not always going to be the case and I can see a scenario where federal taxpayers get “re-building fatigue” for folks that want to live in low lying lands on the Gulf Coast.

I didn’t look into property yields but imagine that this is a situation where the “rent or buy” equation swings towards rent. The exception probably being a condo purchase if I was going to use the place extensively and it was a small part of my portfolio.

Of course, I am willing to fly to New Zealand or Australia for weeks at a time. From a property investment point of view, I like the markets of Tasmania and the South Island of NZ over the next 10-25 years.

If you live in the Northeast USA then you can’t exactly fly to Nelson, NZ for your Easter vacation. So, I can see the attractions down here in Florida. It’s a very beautiful part of the world.

Anyhow, I plan on using the US Gulf Coast as a leading indicator on how global warming might impact property values. If you are in your sixties then this probably doesn’t impact you all that much. As an investor under 40, it is a consideration for me.

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Last week was seriously hot and humid here. It was an excellent reminder of the challenges of tropical training. I slipped back into the lessons that I learned in Hong Kong.

I’ve been reflecting on the training program that I subjected Baron to in late 2004 before Hawaii – his in-race meltdown was completely my fault (sorry buddy). It is a good reminder that coaches must continue to “do” in order to be able to successfully advise their athletes. I’ve spent thousands of hours in hot weather training and failed to remember what I’d learned. By writing it down now, I hope to do better next time.

To know, but not to do, is not to know.

My hydration rate is creeping up to 1.5L per hour now and that is for training prior to 10am. I’m still losing weight through the workouts even at those intake levels.

Reflecting on my personal hydration challenges as well as my Kona training camp, it amazes me how Molina was able to go 8:31 in Hawaii. He doesn’t do well in the heat at all. I think he told me once that his secret was to get in 8:11 shape.

Personally, I have another theory – fatigue management. Many coaches and most athletes think that endurance sports are about over-coming pain – believing that the magic elixir lies in developing superior pain management. Articles, and training programs, that are built on pain are highly popular because they appeal to athletes’ (misplaced) biases.

Pain management is likely a factor for traditional endurance sports of 2-120 minutes duration. Beyond six hours, I think it swings greatly towards fatigue management.

In my experience, we are fatigue limited, not pain limited. When we slow, our brains are shutting us down because they are tired of being tired. Well paced ultra-events simply grind the psyche down. Certain athletes learn how to cope with, and train their ability to endure, extreme fatigue.

The goal of fatigue management being to completely remove the emotive brain from the decision process of whether to stop, go, speed up or slow. That is my experience of “athletic flow” and a key component of the bigger picture that lies behind my preferred approach.

More on that, perhaps, at a later date.

Back to Florida… between 10am and 5pm, we can only do light cycling or swimming. The local pool at the Y is geared towards aqua-jogging so real swimming isn’t an option there. M made friends with the head swim coach so we now have two hours of long course swimming available 4x per week. That’s a big bonus because that pool has a reasonable temperature.

I have a half finished piece of behavioral psychology / decision making. I have another easy day on Sunday so, perhaps, I’ll get a chance to finish it off.

Right now, it’s back to work.

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