David Alade

A place where I organise the chaos of my mind

Category: Articles (Page 9 of 14)

The Ultimate Bitcoin Resources

January 1, 2021 /

I often make remarks that I consumed more than 100 hours of resources on Bitcoin not just to understand it but to also build a conviction in it.

Thinking about it now, I’m sure that hours would’ve increased to more than 100 hours.

I want to share all of those high signal materials around the internet with you if at the least, it will help you understand what Bitcoin is all about.

My Favourite Articles

  1. Bitcoin is Common Sense
  2. An Honest Account of Fiat Money
  3. Visions of Bitcoin – How major Bitcoin narratives changed over time
  4. A most peaceful revolution
  5. Bitcoin’s Security is Fine

Keep Up With This People/Blogs

Parker Lewis – he is the best. I like it when people know their onions as we like to say. He writes about the fundamental revolution that Bitcoin is catalyzing. He cuts through the noise and presents thought provoking argument in each of his articles. Start here.

Hasu – Hasu is incredibly brilliant. He writes beyond the surface of Bitcoin price as everyone tends to do. He considers the social implication of a world under Bitcoin, he is objective in his estimations and on his many takes. Start here.

Nic Carter – “A most peaceful revolution” is Nic’s most popular essay and it is so deserving. The site is a complete archive of his recent (2017-20) content as it pertains to investing and cryptocurrency. Nic is a general partner at Castle Island Ventures I am a co-founder and chairman of Coin Metrics. Start here.

Ark Invest’s White Paper –  This paper lays out the case for Bitcoin.ARK described how the Information Age gave rise to Bitcoin, a novel economic institution designed to challenge legacy financial systems. We explain how legacy financial institutions, which have evolved through a trust-based model, appear to have fallen short of the four economic assurances necessary for a predictable financial system. We then analyze Bitcoin’s behavior in relation to these four economic assurances and explain why we believe it is designed uniquely to satisfy them.

YouTube Resources

Hidden Secret of Money series by Mike Maloney – this series was very important in helping me to understand the history of money and why different money failed in different empires. Though Mike’s conclusion was that the world will come back to using Gold as a form of money, it was still a very important series that aided my understanding.

Real Vision Interviews – This was my curation from the 100s of interviews on Real Vision TV. Some are short videos and some are long conversations. They are all together worth your time. What I like about this series is that there were some arguments against Bitcoin in it. Though they were about confusions on how to value Bitcoin, they are important for your understanding as well.

What Bitcoin Did – this was probably the only Podcast I used to listen to when I started going to the rabbit hole. It is featuring here simply because I want you to focus your attention on the Beginners Guide To Bitcoin episodes. It is well curated from their YouTube channel.

Books

For books, the best place to start I will later learn is the Bitcoin Standard by Saifedean Ammous. An incredible book that goes as far back as the Yap Island to trace the history of money and arrive at what might be the final iteration of money, Bitcoin. If you don’t read any other book that I will put here, please read this one alone.

Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond – this book was written by a Bitcoin convert if there’s anything like that. Chris was once Anti-Bitcoin. He was even on a national TV program to call the end of Bitcoin. He wrote this book beautifully, explaining what makes Bitcoin special relative to other coins and even proposed an innovative way to value Bitcoin. It’s a great read.

The Price Of Tomorrow: Why Deflation Is Key To An Abundant Future – Jeff’s book was my motivation for writing this article. Jeff expanded on the idea of technology as a deflationary force. He explained that inflation is not normal in our world even though we may have accepted it as normal. Bitcoin is the form of money that will later fulfil this audacious goal.

Podcasts

  1. What Bitcoin Did by Peter McCormack
  2. The Pomp Podcast by Anthony Pompliano
  3. Unqualified Opinions by Ryan Selkis

I hope you make do with that for now and if you have a specific interest in a topic, comment under here and I will get you the resources as soon as I become privy to it.

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Do

January 1, 2021 /

Thinking about it, a new year is not particularly different from any other day when we sleep and wake up. The earth keeps rotating around the sun, the galaxy retains its course, and the birds of the air continue to sing and fly. So when you think about it that way, there’s nothing different.

However, for the human race, it is different. We have always paid attention to time, from the earliest civilization to the first-ever definition of time in 1,500 BC by the Egyptian. We do so to make the prediction of the future easier.

Defining time, we could tell when the harvest is to come and when planting is supposed to start and many more. We did not invent or create time. It has always been. We only advanced to give it our definition. It means if there was an alien life in some other galaxy, their definition of time may be different from ours.

While I was thinking of the time (year) 2021 in 2020, one question that was prime to my heart was “what do I want the year to look like for me?” I settled on the fact that it has to be a year that I talk less and use my time to build something. And you can only build by doing, i.e. by acting out on your knowledge.

In light of that, I see the year more as one where there will be more doing to build. Our observation of time was necessitated by the principle of doing. We wanted to know when to plant and when to harvest, we wanted to know what to harvest and what to plant, and we wanted to be able to tell what our doing will result in. If all we cared about was to just talk, sleep and wake up, then we wouldn’t have cared enough to define time as much as we do.

Yes, there might not be a difference between yesterday and today in the Milkyway, but for us, there is a huge difference. It is a reminder call to DO. To wind up the end of something and prepare for another full cycle. Companies are closing their account and opening a new one, individuals are going to celebrate another birthday, and the earth will give new harvests and allow more planting. Our observation of time is to drive us to DO.

So this next 365 days, I urge you to do as much as I am urging myself. In whatever way you understand or interpret the word DO, please DO.

DOing could mean reading more, starting a company, joining a community, investing, paying for that course, starting a relationship, being more available for those that love you etc. I even like this list by Tola

Every new year at the very least offers you the opportunity to rethink what you’ve been doing and recalibrate to what you are supposed to be doing. Don’t waste this important opportunity.

Whenever you happen to stumble on this post, I also have this to say:

Your year is not determined by what you do (did) or didn’t do on January 1, not at all. It has more to do with what you do every day of the year. So DO, Just DO and Keep DOing.

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The Work We Do

December 29, 2020 /

That title was the phrase that came to my mind as I realised that it appears I’ve done a lot today while in actual sense, I have only done little.

This is an observation article. Something I learnt from my work and I thought of writing it out for two reasons. One, to be able to fully comprehend it and two, to see if this applies to me alone or it’s general.

I set out to work on what I’ve not done before and instead of allowing myself time to get it done gradually, I chose to do all the work on one seat. I was doing it until I reached a roadblock in my mind and couldn’t continue again.

Now, instead of letting go of the task and moving on to something else, considering one, I have it’s project that completing it far more important that when it is completed and two, I may need to do more reflection or research before I can continue, I chose instead to be fixated on the short timeline I gave myself.

The result was an epitome of what usually happens anytime I attempt this sprint approach to a task/project that is meant to be a marathon. I get mental fatigue, take a nap because of the fatigue and when I wake up instead of doing the reflection, thinking or research, I would usually choose to continue with the sprint.

Typically, I end up not doing much in addition to when I first had the mental stop. But by this time, the day is far well gone and I probably need lunch already or even dinner. Note, I am the type that won’t be able to do much creative work when I am too hungry. And so, my sprint approach hit another big obstacle.

At the end of a typical day like today, I tend to achieve less. That’s bad but I’m happy I am realising it now. Not just realizing it alone, I am even able to put it in words. That’s a big win. “A problem defined is half solved” goes the popular saying. And I believe mine is half solved as well. Going forward, a sprint task will remain so and will be approached so and a marathon task will be approached as such as well.

Where do I go from here?

I read an article by Mark Essien that preached radical focus on the task at hand. Mark said that “ignoring all noise and focusing on that one project until you arrived at “completion” is the best way to get maximum result.” At least that’s how he has done it.

I almost subscribed to the letter of that article instead of its spirit until my current observation. I think the most important point mentioned by Mark was the fact that before you begin your radical focus, you must define clearly what “completion” mean for that project or task because not all tasks or projects can be completely completed. I agree to that now 100%.

Let’s assume the task at hand for me was to write a guide for investment that will amount to 10,000 words. What I’ve been doing before was to wake up one morning, sit down on a spot and determine that I will get the 10,000 words written on that spot. And that would mean radical focus, since it would require me to shun every other thing beside me.

However, since I’ve concluded that’s a wrong approach, this is what the spirit of radical focus would mean instead:

  1. Write 2,000 words per day
  2. The definition of completion per day would mean writing 2,000 words
  3. Once I’ve written 2,000, I can move on to another task for that day
  4. In 5 days, I would’ve completed the marathon.

This I will do going forward and if you happen to also be like me, I think you should try it as well.

How to deal with FOMO

December 27, 2020 /

One of the things you will have to struggle with as an investor is your conflicting emotions. Greed and hope, loss and gain, fear of missing out and fear of being in, the list goes on. Beneath this is a deep-rooted desire to make more money, be on every bull ride, and make the highest return possible in the market. But how feasible are these desires?

When we look at asset prices retrospectively, especially those on a bull ride we tend to see a continued rise in price alone. We don’t think about why it is rising, when will it stop rising, and even if it continues to rise, why we are buying it. FOMO is fundamentally responsible for this.

FOMO is what we have when we want to be on the bull ride of all assets and “fear of being in” is what we have when we don’t want to be in on a bear ride of an asset.

FOMO is real though and we need not deny it, we just have to know how to deal with it. In a recent podcast with Mark Cuban, he was asked the best way one could invest their money, say $15m, and his answer was of this nature:

“Put around $2m in an index fund and allow it to compound. That you do for safety and security in case all other things that you do turn on their head.”

The answer went on but I hope you got the gist. Everyone must give a priority to safety even if you have up to $15m.

So how can we better deal with FOMO?

First, ensure you have your safety net. Preferably, have that invested in a low cost and less volatile asset. Going by the advice of Mark Cuban, I will say an S&P 500 ETF. This should be where the larger percentage of your investment goes into. With this, you have peace of mind and little worries.

Once you have that covered, about 2 – 10% of your investable amount can be deployed into trending assets of the day. When it’s Tesla, get on it, and ride with it. When it’s Bitcoin, you join the wagon again.

That percentage is high enough to give you the feeling of being among (which is what we really seek plus the money) and low enough to ensure that if you lose a part of it or all of it, it won’t significantly affect your lifestyle.

Another thing you will have to deal with though is you raison d’etre; why you are participating in the bull ride. If you don’t settle on this one, you tend to always get your hands burnt. Are you in to make some quick 50% return or there to hold onto it forever or there to hold until it reaches its peak price? Whatever your “why” is, know it beforehand and follow through with it.

And that’s it. That’s how to better deal with FOMO.

What you should never do is bend to the will of FOMO by participating with a sum you cannot afford to lose. Example may include, a sum kept with you by someone else, or your school fees or your rent or any other kind of money of such nature. Beware.

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My Investment Journey In 2020

December 26, 2020 /

This is a story I enjoyed writing not because it’s full of glamour but because it includes, what I will call my mistakes and/or what is typical of every human being who will care enough to admit it. I also enjoyed writing this story because it cut through the noise we make on Twitter and laid down my unabridged, concise and direct lessons.

I cannot recollect the exact time and period when I first became fascinated by the world of investing. However, I can tell that my interest in it is a very enduring one. It has stayed through many ups and downs.

As I wrote in this article, my first ever experience buying a stock was in 2017. I registered with a stockbroking firm and to purchase any stock, I will fill a form called a mandate, sign it and deliver it to my stockbroker to execute on the next trading date for them. I said “for them” because they don’t trade every day. Lol. I enjoyed the experience but it wasn’t long before the friction became unbearable and the subpar experience tiring. So I retired. I liquidated all my funds and just left it in a savings account.

In 2018, I was privileged to be introduced to a WhatsApp group where top finance professionals in Nigeria dominated. One of the frequent topics we usually discuss is how we can get the opportunity to invest in the foreign market seamlessly. So you can imagine the kind of joy that filled my heart when someone said “check out Trove” on one of those days when the conversation came up again. I checked it out immediately and a new story began. By the way that was in 2019. I wrote about Trove immediately.

I didn’t start using the platform until 2020 though. Yes, I can be that patient. I told myself none of such activity will start until January of 2020 and so was it.

Even though I wasn’t going to invest until 2020, I followed one company religiously; Stock A. I knew Stock A was a great company that a lot was ignoring because of temporary friction with deliveries and production. Stock A was redefining a new normal and I was determined that come January, that will be the first stock I will be buying. Did I buy it? Oh yes, I did. And I loved that I did.

I’ve told this story to a lot of people in the year. I bought Stock A when the price was $531 pre-stock split. Unfortunately for me, the following day after that, the price started going down. I couldn’t believe my eyes. Oh, I should mention that it was my first time having to execute a trade myself and watch it go up and down, remember I came from the world of feeling a mandate. The feeling wasn’t great at all seeing my hard-earned money “losing value” in my eyes. I couldn’t sell because that would utter stupidity. Bear in mind that this is a high conviction stock for me, having followed it for more than 6 months from the previous year.

It got to a point, I started praying for the stock to go up and I promised myself I will sell immediately once there is at least some gain. I wouldn’t deceive you, that was my story. That one experience though will go on to teach me some of the most important lessons that I will carry on forever on this journey.

Volatility is a feature, not a bug

I was naive and if I had learned this lesson before venturing into the game, I would have understood that stock prices don’t go up in perpetuity in the short term. They are volatile and Stock A even more. I will spend the rest of the year, reminding myself of this lesson. In fact, I capitalized on the volatility in the year, as I tend to buy more when there is a significant pullback and I have the cash to spear.

Great sleep at night is my target, not the highest return on the market 

Truth be told, I will like to have a 1000% return on my investment in any given year. A friend put on his WhatsApp status that “in a bull market you have the choice between being right and making money” As much as that sounds great and to which I agree with it, I will like to add a third choice of “having a great sleep at night.” Where did the idea of great sleep at night come from? During the short period of holding Stock A, I checked my Trove app quite impulsively, every hour, I’m on it to see what’s going on with my investment. Poor me. I will later learn that “in the short term, the stock market is a voting machine and in the long term, it’s a weighing machine” – Warren Buffett. So I had to decide there and then that any stock that I cannot close my eyes on and have a good sleep will not make it into my holdings. 

Know your game, play your game

This is in two parts:

One, if you are on Twitter like me, FinTwit is a very exciting place to be and a lot of advice and stories flying around. If you allow those stories to get to you, you are almost bound to continually make mistakes. Knowing your game and playing your game is a guiding mantra that you must follow.

Types of games:

  • Some don’t know their game nor do they play it but come online to yab
  • those that play a kind of game that is not suitable for you (won’t give you a good sleep at night) 
  • those that trade in stocks
  • those that buy only Index Funds and nothing more
  • those that only do stock picking. 

Different people do different things in the market. You need to define why you are there and focus exclusively on that. Oh, I should not fail to mention another kind of game… some may have $100k in the market but that sum is not even up to 0.1% of their net worth so they can afford to gamble or play around with that sum. Yet, there are some that their whole life saving is $500. Those two are not logically meant to be playing the same game at all.

The other is divergent between being someone that manages someone’s money and you that manages your money. You are not playing the same game at all. You are worlds apart. While you can buy an asset that you believe to be of good quality and hold on to it for years, even if it doesn’t return excellently, the asset manager, on the other hand, has a threshold of return that he must have else, investors will pull their money away from him. You have the luxury of time and patience. Use it to your advantage.

Owing to this knowledge, the retail investor has no business with metrics like “stocks we are watching this week,” what metric would do a greater good is “stock we are watching for the decade because of this and this.” You may not find it readily available though.

The point of deliberately choosing your game and playing it cannot be emphasised enough at all. Yet, it’s a must you know it, else, you have no business being in the stock market at all.

It’s amazing what one failure can teach anyone if we took our time to reflect deeply on our steps, thought process and decision-making process. Let’s continue.

Psychology matters 

“Money decisions are made on the dining table, not on spreadsheets” Morgan Housel would say. I am a good definition of this and I admit it. This doesn’t mean I don’t do my research before taking actions, it just means I am human and I must always factor that in all my decisions. When I sold Stock A, it was simply because my emotions couldn’t handle the volatility anymore. Maybe if I had gone back to my “spreadsheet”, it would have calmed me down and helped me to make a more rational decision. But that’s why I’m human, given a path with both fear and opportunity and another with safety, my instinct will always choose safety. Take the time to understand your mind especially as it relates to investment, it will help you a lot and make you successful. This point was what the author of “What Works On Wall Street”, Jim O’Shaughnessy noted that made him conclude that the only sustainable edge left in the market is human behaviour arbitrage.

I sold Stock A with a 50% gain but Stock A did 700% YTD. I have no regrets. What I learnt from selling are invaluable nuggets that will carry me for decades while I remain not only in the market but in many more endeavours.

Some more lessons

Stock B! Another stock that taught me invaluable lessons. I bought, sold and bought again. But what was going on in my mind and why did I buy the same thing that I sold?

I must intimate you at this point the kind of game that I play in the market. To start with, the sum that I put in the market is close to 50% of my net worth. That said, my principle is to buy assets/companies that I can hold “forever”. Why? I don’t have the time nor the interest to research a company and then keep up with it forever to determine if it was time to sell or not. I don’t have that luxury of time or interest. So I do my research once and determine if I can hold this asset for long enough. Once I certify that I put a sum in it and watch it grow.

Same was for Stock B but more.

I saw Stock B dominating an industry that I referred to as “here to stay industry”. And Stock B was on its part to declare profitability until Covid-19 happened to them. So the price was falling way too quickly, I couldn’t take that considering I had bought the stock at an ATH (I usually don’t mind this since my holding time is forever). So I sold while it was falling to cut my losses. Beyond holding Stock B though, I was also interested in the business model. However, I noticed that the moment I sold, I wasn’t paying attention to them again. I didn’t like that, so I bought the stock again at a very low price. Little did I know that I was buying at the bottom.

As providence will have it, my position in it is almost returning 100% YTD.

What’s the lesson here?

  1. It won’t be great if you had seen Stock B in my portfolio and chose to buy without knowing why it was there. I had it because I loved the business. Yes, the company is trying to do all things great but the return does not justify the effort when I bought it. It might have been a different story as well.
  2. Even though my holding period is forever, it is occasionally wise to cut losses and move on. Peter Lynch said “people would say, it’s gone down this much already it can’t go any lower”, well history taught us, it can go a lot lower. Knowing when to pull out despite your thesis and especially when your thesis has been threatened is a needed skill.

This year was the first time for a whole lot of us in the [US] stock market and if the only lesson you can remember learning in the market is the 50% or 500% return on an individual stock you own, you have been doing it wrongly.

The most important lesson of the year

Probably the most important lesson I picked this past year was the importance of a managed fund or passive fund as a goal of achieving the ultimate investment goal of a great sleep at night. A Vanguard Total Stock Market (VTI) fund will be the perfect example of this.

While you will not have a 500% ROI in any given year, buying and holding it would mean you are making a bet on human ingenuity and quest for efficiency. 

What does that mean?

VTI is an ETF that represents the whole US market and beyond the US market, it has some of the best companies around the world listed on it as well. The implication of that is that the companies in the fund have the best of the best around the world working daily to ensure the companies thrive. Well, so do we have mediocre companies in it. However, if history is any indication of which side thrives more over the other, then, we may conclude that the good companies are always great enough to cover up for bad companies.

What’s the implication?

It simply means you can buy the ETF and have a good sleep at night. You need not worry if the price is down today nor should you worry if it will be up tomorrow. You are betting that humans will continue to get better, optimize for efficiency and ease and your bet will pay off. We are humans, after all, we can’t settle for less.

While I’ve used a market fund in this example, other funds may help you fulfil such a quest for investment return under a philosophy of good sleep at night as well.

It was a one long year of ups and downs in the market. I am grateful for the early failures that took to heart enough for me to pay attention to what matters beyond the returns. A lot of investors who have grown in wisdom and wit have similar stories of early misjudgement to tell. In this, I find solace and welcome myself to their fold (lol).

Bitcoin Has A Multi-Trillion Dollar Question To Answer

December 17, 2020 /

Bitcoin as an asset class is still emerging at best. It is relished with a lot of possibilities from replacing all fiat to becoming the transaction powerhouse of the world, it has been dubbed the internet gold and enthusiasts expect it to replace the physical gold in terms of market capitalization, an event which will bring its market value to $7 trillion. Some claim it will be the primary way to do cross border payment since fiat cost of such payment can’t be eliminated.

The truth is that it is doing all of these functions already. I hold it as an asset class in my personal portfolio and I’m sure so do others. My country has been reported to be one of those actively using Bitcoin to bypass trade hurdles and facilitate cross border payment. MicroStrategy is holding Bitcoin as a reserve asset in their balance sheet in place of Gold. And a lot of merchants accept Bitcoin as a means of payment on their platform already.

While all these happen and Bitcoin evolves, all that we are seeing are still on a micro scale relative to what Bitcoin’s potential. And that brings us the question why it is not doing it yet. Why is the internet gold not replacing the Gold market market capitalization yet and why is it not powering all the world’s cross border payment yet with its apparent advantage?

If Bitcoin fulfills all these assumed potential, it will be a multi-trillion dollar asset. But to do so, it needs to first cross some hurdles.

Imagine 2030, a Deutsche Bank report published in 2019 looked at the potential risk attached with the fiat system and its possible collapse in the event that the government is unable to sustain it any further. It imagined Bitcoin as a viable replacement (because of its inherent advantage of course). However, it highlighted the three hurdles below before it can take that position.

  1. First, they must become legitimate in the eyes of governments and regulators – if bitcoin will become as mainstream as imagined and even replace fiat in case the system fails, it has to become legitimate in the eyes of the government and the regulator. Which simply means it has to lend itself to regulation. Yes, it’s decentralized money,  but the government needs to find a way to structure its monetary policy around it, in terms of taxation, jurisdiction and classification to name a few.

This hurdle will be the most important to cross and if it does, we can be set for a new era of monetary policy and economic order. 

  1. Since it will mean basing a robust financial system entirely on electricity consumption, is the world ready for that? Bitcoin can’t be separated from power consumption and one estimate currently has it to be consuming electricity more than the whole of Switzerland. Also, the system will need to be prepared for possible power failure due whatever reasons. And when I say whatever reason, no possibility is too impossible not to consider. As I like to say “risk always looks impossible until it happens.”

While this is a question the world and Bitcoin will have to answer as it prepares to replace the fiat system, Nic Carter, a partner at Castle Island Ventures, a public blockchain-focused venture fund based in Cambridge, Mass has a caveat to the claim.

According to him, “part of the reason Bitcoin consumes so much electricity is because China lowered the clearing price of energy by overbuilding hydro capacity due to sloppy central planning. In a non-Bitcoin world, this excess energy would either have been used to smelt aluminum or would simply have been wasted.” So the argument is not that to say Bitcoin isn’t using much electricity but to say Bitcoin is a savior of what would’ve been a matter of waste.

Whatever the case maybe, the question of electricity is something Bitcoin will seriously have to deal with to scale. Still on power consumption, “the Bitcoin network processes fewer than 100 million transactions per year, a “completely insignificant” figure compared to the 500 billion payments processed by the traditional financial industry. Yet consumes more energy per transaction than all the rest of the world’s banks combined,” noted Alex de Vries, a Bitcoin expert at PwC during a BBC interview. 

  1. Cyberattacks are also becoming more frequent – Deutsche Bank noted,  “In January 2018, the Tokyo-based cryptocurrency exchange Coincheck reported that hackers had taken £400m. Even though transactions for many cryptocurrencies are public, all 523m stolen coins ended up in nameless accounts.” While this is a very serious one as well, I fear we may not be able to completely mitigate this. Bitcoin may not be subject to hack but the exchanges are. Yes, there could be a private ledger but not everyone will subscribe to that option.

Bitcoin is filled with potential, the fiat system is currently undergoing an existential threat with rising debt levels and economic disparity. However, for the Bitcoin network to replace that broken system and become a multi-trillion dollar asset, it must answer the questions outlined above.

The Natural Economic Order of The World Is Deflationary

December 17, 2020 /

The government through the instrumentalization of the fiat system made it inflationary.

Imagine a hypothetical state of the world where you and I alone exist in. Our only means of survival is fishing. So every day we go to the nearest river to fish. There’s no tool at all to fish with so we do it every day long with our hands.

One day, through the process of thinking and experimenting, you discovered the tool called “hook and line”. With that new tool, instead of getting just one fish a day after long hours, you start getting 3 fishes per day. Since you don’t need more than one fish to survive a day, the implication for you is that you can remain indoor for 3 days without having to fish. That’s assuming, of course, we can preserve the fish.

Now, for the first day that that breakthrough happened, we would have 4 fishes available for consumption. A question for you; has the value of one fish increased or decreased? The answer is the value of one fish has decreased.

Whereas both of us could die if we didn’t catch a fish on a given day, now we can survive two days on one day’s work (4 fishes combined output will feed us for 2 days). The value falling is deflationary – the continued drop in the price of goods and services; the price being a depiction of value. That’s the natural economic order of the world.

Now imagine there’s a third person, and beyond the fish, we also have a total sum of 100 money amongst us when we used to have 2 fishes per day. Now that we have 4 fishes, what do you think should happen to that 100 money in terms of its purchasing power? Again, it means the 100 money must be able to purchase all the 4 fishes, i.e. increased in value while fish decreases in value.

What if this third person somehow increased the available money from 100 to 200? Then the price of fish will remain stable at 50 money per fish, right? What if he increased the available money to 400? Then you will need 100 money to buy one fish even though fish is now in abundant supply.

That there, is the definition of inflation and it is what the government does or has been doing since it abandoned the gold standard in the 1970s. In fact, it’s the #1 function of the central banks, price stability. 

What happened in that analogy is typical of what happens under the current monetary system. Government through the central banks regulates the price system by creating more money to maintain a targeted level of inflation.

As you would have observed as well, tools (technology) are invented to make the system deflationary. As we invent more tools, products and services (fish) becomes less expensive. The other side of that coin though is that wages decline and unemployment rises. You know why right? If your tool can catch 3 fishes in a day, why can’t we just make more of it? If we do, I won’t have a job again since I’m less productive and your tool can even do much more. So unemployment rises, and that is the second function of the central bank; keep unemployment at an acceptable level.

If you are like me, the next question on my mind would be why on earth will anyone do that? Why will we keep on reducing the value of the money in the citizen’s hand?

That is a question that I explored in another article.

Run! Naira Is Reducing You To Poverty

November 22, 2020 /

I’m tired.

I want to use my head to think of something else.

I’m tired of having to always think of a way to game the system I’m unavoidably part of.

I should be using my head and time to think about how to compound wealth. Unfortunately, most of my time is spent on thinking of a way to outsmart my country’s currency; Naira.

2020 has been a very rough year that we all can’t wait to get out off. For my home country Nigeria, it’s even more devastating. Amidst that, we woke this morning to the very bad news of entering another recession. If my counting is right, this is the 3rd or 4th of its kind during this administration that’s only just above 5 years into their government. Okay, it’s actually the second recession.

It got me worried. And while I could have used my time to think about the education of an Angel investor this day, I am here to sound an alarm about wealth erosion and write about how members of this community can protect themselves from an economy that’s bent on sapping every vitality from their hard work.

Naira punishes you for doing nothing

In just under 12 months, we have all gone poorer by an alarming percentage of 33.3%. We were told to save, and we saved. We were told to invest and we invested. We were told to be frugal and we have been. All these in an attempt to help us build wealth. However, it seems all that effort is worth nothing seeing Naira has decided to keep us in perpetual poverty.

It doesn’t matter how much you earn or save or invest nor does your frugality matter. Over the past few months, you have robbed of 1/3 of your wealth if that wealth is domiciled in Naira.

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Inflation is the cruellest tax that there is. It saps the vitality of your wealth away subtly and slowly without your knowledge. You may be happy with the N10m in your bank account until you try to exchange that currency with value and you realize that the value of your N10m has been reduced to almost nothing in the market.

That’s why I said Naira doesn’t give room for doing nothing. You must act. Act always and act consistently.

Guide to escape the wealth erosion spree

You work every day and at the end of the month, you get paid some amount of money. Or it could be that you work and earn every day or infrequently. Whatever your case might be, I can bet that as you earn any income, you set apart a portion of it to save and another portion to invest. Something I’ve preached a countless number of times.

Naira is the problem. Not your work. So to escape wealth erosion, you’ve got to leave Naira alone as much as possible.

Here are things you can do with the money you are putting aside for savings and Investment:

Ordinarily, I believe you should have your money divided as follows:

  1. A portion that you spend will have to spend in a month
  2. A portion that is for emergency sake
  3. A portion that is invested for your long term wealth

That’s just to keep things simple.

There’s nothing you can do about the first portion, it must still be domiciled in Naira because you spend mostly in Naira. So leave that in Naira. Buy your foods and have your fun. Don’t let Naira give you a headache as it gives me sometimes.

The portion that you set for your emergency needs more attention.

An emergency fund is a bank account with money set aside to cover large, unexpected expenses, such as unforeseen medical expenses, home-appliance repair or replacement, major car fixes and, costliest of all, unemployment.

It all depends on how much this amount is in your bank account currently. However, if it’s already running in the mid 6 digits (> N400,000), I will generally advise that you save it this way:

50% should be kept with PiggyVest’s “Flex Naira”. For a simple reason, they offer easy access to your fund at the highest ROI (8%) in the market that I’m aware of.

50% should be saved in a dollar wallet. PiggyVest’s “Flex Dollar” is still an awesome choice for this. Especially because they still offer a 7% ROI on a flexible account. Otherwise, I will recommend you use an Eversend especially if you are the type that does a lot of crossborder payment or has some of your expenses domiciled in another currency other than naira, says dollars. Eversend also issues free virtual dollar card that is active on a lot of e-commerce sites. There other platforms that offer dollar wallets, if the two options above are not satisfactory.

Protecting your long term wealth

Alright, that’s about those. Let’s get into the real deal. The portion that was originally marked for longer-term investment; e.g. saving to build a house in some 5 years time, go to school in some 4 years time or funds for your children future education etc.

My answer for this is actually very straight forward. Avoid all naira denominated investment by all means. I seriously mean that. It’s that serious and crazy.

No matter the return that you might get on any naira investment this year, I bet that you do not have any real return. I will break it down a bit.

If you invested N100k in January 2020 and got 30% ROI (very rare) after 12 months ended December 2020, you would be happy that you made more money and indeed you made. However, Your new N130k can now only afford to buy $271 (@ N480/$). Whereas your 100k in January could have bought $278 (@ N360/$). That’s a negative return to start with.

You may puzzle and say but I don’t need dollars and I don’t have to buy dollars. Yes, that’s true. The reason I am fond of converting your income to dollars is basically to serve as a proxy for a store of value. It is not to say you have to convert your money to dollar. Another example would have been me using the price of a bag of Rice, the food we all eat.

Here’s NBS data on food inflation. An alarming 17% increase year-on-year. Which invariably reduced your real return by that percentage and you are left with a little percentage above 10%. However, note that that’s just food inflation. You don’t spend on food alone. To avoid the complication of having to talk about different inflation rate is one of the reasons why I normally resort to using dollar as a proxy.

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I hope that scares you a bit? Please let it scare you.

I am not an alarmist and my message has not changed. Flee any investment in Naira. Here are places you can flee to:

RiseVest – All assets offered by this startup is denominated in dollars. I believe that any asset class that you go with will definitely outperform any type of Naira investment in the short and long term. RiseVest gives you exposure to Real Estate assets, Fixed Income and US Stock. You can’t have it any better.

Buy US Stocks or ETF yourself – if you know how this works, do it. Trove Finance and Invest Bamboo are equally great to check them out. By stocks that are of good quality and buy ETFs like QQQ, VTI, VTG ARKK, ARKW. Any of those ETFs are good and I recommend them (at your risk of course, lol).

Buy Cryptoasset – this is riskier but having 10% of your investable amount in it is a good start. Ok, I mean Bitcoin now when I say Cryptoasset. This is not an article to tell you the economics of that and the potentiality. I just have to mention it in term of alternatives that’s all. As a community, I know we’ve had a conversation about this before and if you have more question about it, you may chat me up.

All that I’ve said so far is just an opinion piece and advice. What you do with your money is still largely dependent on you. But I urge you that you should not do nothing. It’s a sin the book Naira Chapter 1:1 to do nothing.

Success Compounds

October 4, 2020 /

Have you noticed that it’s much easier to get ”another” success once you get the first one?

A common denominator of all humans is the desire to attain their goals which can then be interpreted as success. However, many struggle to achieve these goals because of an endless reason. Yet, a pattern that has been obvious throughout history shows that success in one area attracts or makes success easier in another area. It is only alarming that not everyone is aware of this pattern, hence, very few leverage it.

Our goal more often than not is to move from your zero (no success) to one (first success). Then the universe will show you her abundance.

Such movement isn’t always easy. Many times, it requires us doing things outside of our comfort zone, going the extra mile, failing a lot on the way and even failing to attain one from zero. It’s a cruel process that our nature isn’t wired for. Moving from no-success to first success requires investment in perseverance, hard work, and faith. Very few are ready to make such investment.

Yet, it’s the way of life. It’s the only way to play the game of life that we find ourselves.

Think about it yourself, would rather click a like on a Tweet with 1,000 likes already or on a Tweet with 10 like? Would you rather work with someone who’s been accorded the best in an endeavor or someone who is just setting our with no track record? Would you rather follow an account with 10 followers or follow an account with 10,000 followers?

Your answer to the above question is the reason for the following assertions:

  • Getting a second job is easier than the first.
  • Raising the second round of funding is easier than the first.
  • Getting your next 10,000 customers is easier than the first 1,000
  • Selling your next 10 products is easier than selling the first.

Our goal is to doggedly focus on having the first success. Moving from zero (no success) to one (first success).

The universe is abundantly rich and has more than enough to go round for all, but it needs you to speak her language.

Her language is that of compounding. Difficult to get from no-success to first success but easier to get first success to tenth success. The universe will reward you with more success once it realizes you have your first success. And the more success you have, the more the units will reward you with. Yet, if you have none, it will not reward you with any or more.

Why does the universe work that way?

It behaves that way for varying reasons. The reason I intend to focus on here is the idea of mimetic behaviour of humans popularized by René Girard.

The mimetic theory says we get our desires from society. We want it because others have it. That creates a form of scarcity and invariably chaos.

Scarcity is the way humans interpret value.

If it’s scarce, it must be valuable. We often forget (or refuse to note) that it is only scarce in the first place because we all want the same thing.

However, that behaviour is what keeps the economic wheel rolling so there’s no ending to it. It is only important that you and I learn what’s at work behind the wheel.

Success at one thing creates that illusion of scarcity as well. Suddenly, everyone wants YOUR success or wants to be associated with YOUR success if they’ve concluded they can’t have YOUR success.

That behaviour ordinarily opens the door to you for the next success.

That’s so because those coming after you and that you also allow in your environment have a form of success (that you also want or want to be associated with if you can’t have it) in them that can be easily leveraged for your next success.

They will willingly open those doors for you because (remember) they want to be associated with you or want your success just as you theirs.

Like I said, it keeps the wheel rolling so you can’t undo it.

Understanding it though is a leverage.

17 Radical Ideas To Get You Thinking

September 9, 2020 /

I sat down reflecting on a lot of ideas that I’ve seen successful people adopt and that I’ve adopted in my own life.

I came up with this 17 radical ideas. Some of it may hurt you, some may look obvious, some may look unbelievable and others may look impossible. But together, they are ideas that have turn unknown men to wildly celebrated men, raise people from dungeons to Palaces and allow mean men to sit before kings.

Enjoy it.

IDEA 1. Getting a job is mostly a marketing problem. In retrospect, I realized this.

If you see it indeed as a marketing problem, you will have less trouble finding someone (or a company) ready to pay you for your services.

IDEA 2. Everyone is a marketer and we should all seek to become better at that craft.

Read – Getting Any Job Is Hard Work And Luck

IDEA 3. Have agency.

Have an almost too much self belief.

Be hopeful.

IDEA 4. If your default settings is to always look for a reason not to attempt new and unfamiliar things, I’m sorry to tell you a bitter truth:

It will be hard succeeding in life.

IDEA 5. Here’s another thing I’ve come to accept as well

Those who always seek ease above “what needs to be done” rarely get by in life.

There’s a reward in doing what all others avoided because it’s hard.

Ease is no place for champions.

IDEA 6. Starting is all that matters at many things in life. The next thing after that is continuous improvement of what you started.

Then magic will happen on the way.

IDEA 7.. The end is not always known.

The end is not always what we imagined it to be.

The end comes when we choose it to be the end many times.

That’s why the journey must be enjoyed and what the end may look like must not stop us from the journey.

IDEA 8. Don’t be a donkey.

The tale was that of a hungry and thirsty donkey placed between a plate of food and a bucket of water but died of thirst and hunger because it couldn’t decide which to go with first.

The donkey could have gone for anyone first and the other later. It had all the time.

You have the time. Don’t be a donkey.

IDEA 9. We tell ourselves way too much lie.

Strategy isn’t what you said you will do. Strategy is what you did, are doing and will do.

That’s it. All your “I wills” amount to noting.

I did and I am doing is all we care about.

IDEA 10. You won’t be handed anything of value on a platter of gold. You’ve got to work for it. Everyone in recorded and known history worked for it.

Trust me you are no special.

Read – Engineering Luck: Can We Create Our Luck?

Do the damn work.

IDEA 11. There are gatekeepers everywhere. They will reduce to open the door for you but you must fight fearlessly.

One thing is that when it come down to it, we all have a leverage. Find yours and use it.

IDEA 12. I think free will is an illusion. But a necessary illusion. We must always think we are in control. We must always think in terms of cause and effect.

Randomness determines a lot of it, but we must hold on to anecdotal explanations of cause and effect.

IDEA 13. Help yourself

When you do, the universe rises to help you. It’s a law of nature, it can’t be confounded.

But if you do nothing to help yourself, we will all walk by you.

IDEA 14. Succeed at one thing and the universe will reward you with many more successes with little work.

The first success is all you owe the universe. Other successes will follow suit.

IDEA 15. Never have a goal not be wrong

Never have a goal not to fail

Never have goal of getting it right at first attempt

Have a simple goal to start and be consistent.

IDEA 16. Our mind is bad at understanding many things. We confuse correlation with causation at all times.

Rejection is not an indication that you are not enough. Sometimes it can be a misjudgment from the assessor.

Getting a job at PwC taught me this. I was rejected by firms that weigh less than PwC.

IDEA 17. Sometimes, deliberately put yourself in an uncomfortable condition. You won’t die. You will only learn about:

Your weaknesses

Your strengths

Your limitations

What challenges you

What makes you happy

What doesn’t move you

Basically, you learn about you.

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