I’ve been doing a lot of finance and investing related reading these days, as I move into another cycle of interest in the markets and business in general. Seeing as how I did a lot of writing here last year around this time, it’s interesting to wonder if this is a trend, or just coincidence.
Speaking of which, it’s become pretty interesting to me to realize how the same analyses and measures of companies in some ways can be applied to people. Perhaps it’s immediately obvious to some, but it occurred to me that if I viewed certain people I knew in this light, you could almost gain a measure of understanding about these people are “valued” by other people. Fundamental analysis probably makes common sense in that way, based in things that seem like good indicators of whether something is run well; likewise, the same attitude applied to people gives you a good, but not perfect, way of prognosticating someone’s future.
For instance, take someone who is heavily in debt. They treat their credit cards like bank accounts, freely spending and taking on massive liabilities. They own a car when they don’t need one and bought a house with a giant mortgage. Now on the face of it, you’d think most people would say, ah, this person is financially profligate and probably not that smart in the long run, I’m going to stay away. But no, as happens time and again, people don’t notice these things, or if they do they don’t judge a person by it (and obviously businesses and people differ in the level people take finances into account), or perhaps they do but they’re impressed by the car and the house and the fancy dinners that treat their friends to. They’re all surface, hype and guff, and yet I’d wager that a good 2/3s of the population wouldn’t have an issue with it, would love the attention of such a person, would throw their lot in with them even though, to a less emotionally-driven observer, this person has clearly got some issues.
Now, hypothetically, if you could assign a numerical value to this person, to indicate their quality and their worth to you, depending on what sort of person you were you might say 100, or maybe 50, or maybe 10. Maybe you’d say zero. Obviously if finances were the key indicator to you of what a person was worth, you’d be hard pressed to assign a high value to this person.
Eventually, that person, through bad financial decisions, might end up destitute or at least a little further down the socio-economic scale. Their friends, who loved them when they were having lavish dinner parties and taking ski vacations in Chamonix, suddenly don’t want to have anything to do with them. Their overall value plummets, and now you’re the only one valuing them at a positive number. Everyone else has them pegged as a zero. Perhaps they’d have an epiphany then, change their philosophy about money (much like a company would change their management), and reduce their debt. Maybe they had to go through bankruptcy to do it, to get those pesky creditors off their back. Now they decide that they want to save money and spend judiciously. Maybe they go back to school on a low-interest student loan, an investment in their earning ability in the future. You’re friends with them now — they’ve dropped the high-falutin’ airs and wasteful lifestyle and you get on a lot better. Over time, they start to succeed again, they get better and better jobs after they graduate, and you can see other people taking notice again. This person says, hey, I’ve got money now, I can loosen up the purse strings and take a few ski weekends again. Their old friends are calling them up again, ones that forgot about them. And after a particularly crazy month, they decide that it’s okay to hold a balance on their credit cards again, just for a month or two. And thus, the cycle begins again.
When I start seeing like this, it’s easy to see other areas that analogize well. The older person, who’s skill development has levelled off, and is no longer increasing their salary or trying new things. Their growth is like that of a mature company. (Speaking of which, there should be more emphasis on the death and or maturation of companies and how that impacts the need for constant growth; it’s almost as if it’s a life-cult, where everything is about positivity and the immortal continuance/progress of businesses and anyone who would think otherwise is a naysayer — shades of Babbitt and his boosterism!) Some children, showing greater promise, are given more opportunities and showered with more attention, but perhaps they hit some snags and other issues surface later in life, and the adult never lives up to that earlier promise. Others, that didn’t seem that talented to begin with, excel through a dogged determination and consistency. Perhaps they never become genuinely great, but they have a steady job, lovely children and take good care of themselves and everyone around them and why wouldn’t you invest in someone like that? You’d never get giant returns, but you’d have a solid performer.
Hmm, maybe I should just start treating companies like people (they essentially are by certain law) — call it analysis by analogy.
Posted by Nelson Yee
Posted by Nelson Yee
Posted by Nelson Yee
