Thursday, August 25, 2011

Wealth, Life and Cricket

Wealth, Life and Cricket

© VDS Brink June 2011

This article discusses the building of long term wealth from the viewpoint of an investor carrying scars of numerous mistakes. It looks from the pavilion at sport and cricket in particular and shares ideas on the life of a successful sportsperson and the pitfalls that might lie ahead in a life away from the limelight.

We live in turbulent times with a world slowly emerging from the worst economic decline in 80 years. It will take years to recover the damage. It is also a time when a new generation is emerging with a new outlook on life.
The shadows of 1994 and the impact of the internet changed all and that current ways of doing things simply will not work in the future.
This article discusses it and provides guidelines for coping and using it to create wealth in an uncertain and difficult future.
As our personalities differ, our appetite for risk accordingly, it is critical to be surrounded by people different from you to maintain perspective.
This article was born from discussing many aspects of life with great people on investment and particularly the life of sports women and men.
To soar in life is to know that lots of data and information mean very little. Greatness and victory is if we can move to knowledge, then insight and ultimately the wisdom. To do it is to drown the mind with facts, discuss it with diverse people, test the water, burn some scars, emerge with humility and only then follow your head.
On every aspect of life, this takes time, lots of it.

Francois du Plessis and Tom de Lange of Vega Capital, Laurette Pretorius of Sasfin and Hugo Snyman, Christo Luus, Bonita Labuschagne, Louwrence Erasmus, Thilo Otterpohl, Ian Lane,  Dewald Scholtz  of Third Circle Asset Management play a major role in my understanding of wealth creation.
In their shadows I moved from a salary earning ignorant nobody to a share trader, understanding my limitations, made small fortunes and lost some of it and came out wiser, humbler and understanding my role so much better. It taught me that there are wiser people than me; yet never lose strategic control, to manage my fear and greed and see it all in a wider context.
The world of sport for me was remote and distant. Sport insults and humiliates 85 % of the population. Sport is not exercise, it is hype and glitz. Whether anybody buys a seat at Loftus, it makes no difference, it is less than 5% of their income, the rest is pure media hype
With this cynical view, my roads crossed with wise people on that side of the fence, and a new world opened up.
Christo Spies (former Springbok athlete, batsman for Kovsies plus many others and today the mental coach for both the Cheetahs and the Eagles), a friend and a daily pillar of strength for the past 5 years.
Elizabeth Reynders (double Olympic swimmer), a friend for many years and collaborator on the great post 2010 scenario project when she passionately shared her views on the Sydney and Atlanta before and after the Games.
Steve Rautenbach (former Olympic coach at Barcelona) who was a co-soldier in the trenches at the SAPS reserve force and told priceless stories while doing midnight hours on the beat.
Greyling Viljoen (clinical psychologist and canoe champion of global rivers, Springbok for almost a decade and sport administrator), a comrade in arms for many years at Unisa’s MBA as co-lecturer on creativity gave me insight into the world of high performance, and the limelight that shines and fades.
Wonderfull discussions recently at SA Rugby at Newlands with Steven Roos (ex school mate, operations manager and veteran of 36 years at that holy ground) and Giepie Nel (Blue Bull centre of yesteryear) who escaped the final onslaught of fame and professionally qualified as a dentist, gave priceless ideas.
A great lecture recently by Dr Sherylle Calder of the Sport Science Institute on eye-hand coordination brought great new insight.
The concept of the fading limelight enlightened by my brother, Danie who as a doctor witnesses the devastating impact on our lives. Johann Coetzee, the industrial psychologist, and his concept of “when the corporate applause dies” as seen in real life in my 5 year journey with Allan Heyl who kicked off a new life with all lime lights glaring and a Hollywood movie (“Stander”) to back him up.
We know that 60% of all chartered accountants in the US of A die within two years after retirement and the rest of us between the ages of 63-65, a sharp peak in death rate that drops afterwards.
Leaving that great mining company after 25 years brought me to my knees and 8 months of emotional living hell. (“Why doesn’t anybody phone me”?) An identity destructed, am I still good and competent, worthy of respect?
The corporate applause is addictive. For the young sportsperson, it dies early and can and will lead to emotional distress and subsequent bad decisions.

80% of all super performing sportsmen & women are born January – March. Fact. (Gladwell, 2009) Being no exception as an October baby, I never made beyond the 4th team.
Ironically today after 4 decades, 90% of my compatriots who sneered at me then, cannot even do one flight of stairs. I spend an hour in Virgin Active daily, can do Table Mountain in 1 hour 15 minutes and a comfortable sub 2 hour half marathon... For them, the impact of Gunston, Klipdrift & Coke, Rump and Chips had the last revenge..
Even more so, my dear wife, a November babe, never even made the netball team, yet today is a multiple gold medallist for the 10 kms, in the top 10% in this year’s Two Oceans and last year a national 4th place for Virgin Active’s triathlon. Her compatriots faded into real “tannies”.. so sad.
Then, when working at the age of 22 under the baton of the great Dr Craven as the resident scientist on the John van Reenen world record project, brought insight into the world of sport.
Eccentric as he was, “Doc” Craven also drove a Jaguar, in his case a British racing green XJ with a ridgeback named Bliksem who commandeered the front seat.
He creatively chose a champion swimmer for the 1960 test in Dublin. Attie Baard barely ever played rugby in his life! Attie, a retired doctor and ex superintendent of the Stellenbosch hospital shared his story with me to my delight.
He also relegated Andrew van der Watt the Springbok wing at the time, to Maties’s 2nd team to make room for the aging Jannie Engelbrecht.
Due to his physical appearance, we fondly referred to him as “The Ape-Man”.
I cheated and bribed to get the job to cover my expenses for my sins of not passing my second year maths. All funded by the great Naspers and money was no object.
As most post grad students in sport science came from a BA background, I soon become the resident hero to coach them in the complexities of stats, maths and mechanics. An endless stream visited me in my room to complete their assignments, all paid for by Selected Tassenberg. (That is the one with the cork.)
One of them the Springbok fullback at the time, Dawie Snyman. Respect shown by my mates in the res’s corridors grew by the day. In the same corridors lurked people like Michiel le Roux (Capitec’s founding chairman) and Koos Bekker (today of the same Naspers). Life was beautiful!.
Not stupid yet, I coded lengthy FORTRAN programs solving exponential equations built upon the behaviour of a discus in a wind tunnel. The mysteries and myths of swinging cricket balls were part of the study. This was then discussed with Naspers’s editors. They, also BA types, did not understood a word what we said, yet as media moguls sniffed money in the air, nodded their heads in enthusiastic agreement and kept on footing the bill. I even bought a car!
Ivor Potgieter was the coach who wisely took the new insight and adapted John’s style slightly. The team ably supported by the legendary Dr Jan van Heerden of, "What every boy should know" fame. The rest is history,  we struck gold on 14th of March ’75 when John broke the world record with a huge 50 cm.
It was a great moment in the life of a youngster to meet that humble giant. These days, at the age of 63, he is world renowned artist exhibiting in galleries as far as New York.
John, in the true spirit set by Roger Bannister (of 4 minute mile fame) competed against only one person: John van Reenen.

That brings us to cricket. A game played only at a few places, almost all of them in the Colonies. Sadly it excludes Canada, yet oddly includes Holland.
Where played, it is worshipped, yet the story goes that after 3 hours of sipping diluted tea, the batsman hit a six followed by some applause, the visiting American asked: “Did the game begin?”
When working with the ex coach of Pakistan and later the Titans, Richard Pybus, he told me how he feared for his life after losing a match and the fanatics building effigies of him, dowsed it in petrol and set it alight.
They dress in long trousers and in white. The only sport with a rule that you should behave yourself with swearing not allowed. Girls LUV it. So to steal the hearts of long legged blondes, wear white, be masculine and never ever use four letter words!
My last match was for that miniscule West Coast town, Koringberg, when we played against the mighty Piketberg. I batted no 3 and was out after 5 balls for a duck.
Yet... I love the game and all around it and in my endeavours under prompting of my three teenage daughters, was always on the hunt for autographs.
Gymmed in Brisbane next to the great Shane Warne. Hotelled in London with Brian Lara and Co and the greatest was on the way back from New York back in ’92 to fly to Bridgetown, Barbados to pick up Kepler and team. My seat mate next to me: Mike Procter! At the point over mid Atlantic, a newbie sitting in economy in the back came to speak to Mike and introduced himself to as  Hansie, sadly not with us anymore.. Ali Bacher resided up front in 1st Class..
Only one survival of that flight these days, a member of the under 19 team; a guy named Herschelle.
As a fanatic, I stood on the pitches of Lords, the Oval, Sydney, Brisbane and visited the Brabham museum in Bowral, NSW, twice as I had a project there Down Under. Stood in awe on the Melbourne Ground with the highest light poles in the world, fitting +100 000 comfortably and built solely for cricket and the funniest game invented by mankind, Aussie Rules..
While talking about cricket grounds; in these days of irritating name changes, we also need to look into the mirror. Many years ago, there was a town outside Pretoria, Lyttleton. In a wave of patriotism they renamed it more politically correct as Verwoerdburg.
In the mean time, Dr Willie Basson of the Northern Transvaal cricket union made a deal with the city council to build a cricket ground. They dreamt of all the hundreds to be scored and named it Centurion Park. The Jewish capitalists in Sandton also had to make a move to be politically correct and renamed the shopping complex next door Centurion City.
The city council, after many fights, flag waving and debate renamed the whole city, making Centurion it the only place in the world named after a cricket ground!
When the late Dr Albert Herzog turned his back on his cronies, the same fate befell the Hertzog Tower in Jozi to be renamed boringly as the Brixton Tower.
To divert a bit, with great guys domineering our history as General Hendrik Potgieter and Colonel John Graham who both easily wiped out whole towns before breakfast. They are overshadowed by Lord Alfred Milner who through his underling, Lord Kitchener cold bloodily killed 27000 children, mostly babies and toddlers. (Gilliomee, 2006)
Yet, their legacy is cherished in Milnerton, Potchefstroom and Grahamstown.
Not the end of the saga yet as the Titan’s union then succumbed to the onslaught of the Mighty Rand and renamed their grounds: Super Sport Park!! Imagine a future billboard: “Welcome to Super Sport City”.
Will we never learn?
However the most wonderfull was back in ’94 when we opened our office in Brisbane and a guy walked in. He was the owner of a civil engineering consultancy across the corridor, Maclean & Chapman. As wicketkeeper of Oz and administrator, he was knighted by QE II for his dedicated service in maintaining the tiny bit what is left of the Empire. Sadly he did not attend the sword hitting ceremony as he could not afford the air ticket. His wife almost divorced him!
Sir John Maclean himself. Sir John, a humble person, who helped us every bit to find our feet in an odd country that speaks a foreign language by abbreviating everything while drinking Swan beer. He kept up correspondence with my 15 year old daughter sharing great cricket stories and gave her something to brag about on the playground.
Listening to Sherylle’s lecture, it struck me that second only to playing the violin; the utmost hand eye coordination of mankind is found amongst cricketers. To read a ball coming at you swerving in the air at 140 km/h is not for sissies. They are indeed special people and lots are to be learnt from them and what they do.
The mind of the cricketer surely is surely different from the rugby player. In rugby lots of them at 35 are penniless, desperate, a broken body and an empty mind. Working on wealth creation with a great cricketer we need to take all this in account as it shaped his mind for many years and this unique characteristic just must be used.

This is the field for the experts, yet few ideas might help:
Every Rand/Pound you spend must be earned by somebody (= the root of the subprime debacle?); wait patiently and work hard all your life; beware of scams and promises (if it is too good to be true, it often is!); know how much you earn, spend, save, own and owe, know how much is needed to retire.  (Luus, 2010, pers. comm.)
From Danko’s great book “The Millionaire, next Door” (adapted after many discussions with De Lange 2005-2007):
       Live far under current means: That is within 70% of availability as calculated from the Wealth Index. The WI will be discussed later.
       Spend lots of time, money and energy on ways to built wealth: Count your money often, read, think future, talk to advisors, and take final responsibility.
       Financial dependence >>> social standing. Live modest and show it. The late Dr Rupert drove an ancient Merc and Warren Buffet a 10 year old Ford Falcon.
       Children need to be financially independent. Give everything for education and ongoing education.
       Create a legacy in a trust, pass on to the future grandchildren
       Be clever to see new opportunities. Use strategic insight, vast networks, feel for the future to aid to the work of your financial advisors.
       Do the right things to create extra income. Do work that creates networks and pays handsomely. Strive to cover monthly expenditure for next 5 years from external income.
       Guard against loss.
       Make the best of property, yet understand that there is a price to be paid. (rather buy property shares..?)
       Stick to investments of what we understand. If it are to be CFDs, SSFs, day trading, Hedge Funds, Persian carpets, gold coins, golf estates, offshore gilts and bonds, Emperor Casino or the Lotto, great, but know before we leap.
       Handle risk with a balance between caution and aggression: Always know how much I can afford to lose and keep the foundation intact.
       Above all surround yourself with great people of a diverse background.
Know yourself. Get your Myers Briggs type or whatever indicator. Do Third Circle’s psychological profiling (a steal at only R199). Talk to those same BA types mentioned above. They have a great role to fulfill.
In my case as an introverted, intuitive, thinking perceiver, I am certain to mess it up if I do it myself. My miserable trading record proves it, especially when my pet company Uranium One dropped by almost 80% overnight! This all when my dear fund manager seems to sit boringly on her hands, yet steered it all wisely to survive the market collapse.
Understand your weaknesses, and use your strengths in combination with wise people diverse from yourself.
To make a sure mess, is to sit in the “we-warm-ourselves” crowd and follow the herd. Like the Norwegian lemmings and Hamelin’s mice, you and your cronies will run over the cliff.

Each of us looks at life with tinted glasses. This is our biggest enemy in wealth creation. Some of them are (from Wikipedia):
·       Remembering chosen options as having been better than rejected options.
·       Bandwagon effect; if all thinks it’s great, then it must be.
·       Remembering one's past performance as more different than it actually was.
·       Recalling the past in a self-serving manner, e.g. remembering one's exam grades as being better than they were, or remembering a caught fish as being bigger than it really was.
·       Keep things as it is; do not rock the boat.
·       Difficult to let go.
·       An item that sticks out is more likely to be remembered than other items .
·       The emotion associated with unpleasant memories fades more quickly than the emotion associated with positive events.
·       The inclination to see past events as being predictable; also called the "I-knew-it-all-along" and the “I told you so” effect. In our great country the “good old days” is a lively topic when we braai. We conveniently forget the cheating, bribing, paving the way for our cronies. The only real difference is that these days we at least know about it.
The herd will move through phases in the investment world: Rejection – distrust – safe play - trust – exuberance – greed – whatever – negative – it’s not true – worry – fear – panic – despair – surrender – back to rejection.(De Klerk, 2009)
Since September 2008 we almost witnessed the whole cycle and now somewhere between safe play and trust. Perhaps the trick is to be 2 steps ahead of the herd?
A full life is so much more than being wealthy. (Demathini, 2005). It is to balance family, spirituality, doing sensible work, create wealth, have friends, have a healthy body. If passing into the 50s, creating a legacy will be the 7th pillar.
To sum up: Mind, Body, Soul, Friendship, Wealth, Hard Work and surrounded by Loved ones. Tinker with any of these pillars and your castle of happiness will tumble down.
To be wealthy is not to be rich. It is to survive maintaining our current lifestyle. (Danko 2004).
Demathini (2005) advises that we should have 2x months of salary saved in the bank, then build up to 2 months in bonds, then a mutual fund, then in blue chips, large cap, small cap, derivates and then only hedge funds. It is to follow a route of small steps, covering risk and learn along the way. 
Maglolio (2205) advises a full year of research and understanding before any trades.
The PSG Make a Million competition served me well as I focused on a slice of the market (e.g. Altx) and worked with real money. A great learning exercise.
The most important is to find an asset manager that walked the road. A person that can listen and get under your skin. An open ear, dedicated with perfect administration.
If not drawing a fixed salary, yet accumulated a bundle, long term planning can sensible done with Danko’s Wealth index formula adapted by De Lange (2006).
It gives a monthly extraction rate. Stick to this, money not spend can be blown and enjoyed. All new income is never allocated for expenditure, but form part of the pool. By choosing a conservative WI, the pool must grow over time giving the freedom never to succumb to daily temptations, yet building a legacy.
To explain, that is for another day.
Any relationship should have a fair exchange, in business, in friendship, in love. If we fail in this the relationship will ultimately fail or will degenerate into slavery. (Demathini, 2006)
Fair Exchange is not necessarily money; it can be experiences, new networks, a shoulder to cry on, sharing great ideas or ultimately Cabernet and Toblerone.
I did delightfull work at a Bushveld resort. The creative manager pays me with long weekends! All win.
Some years ago my dear wife went through great effort to help an estate agent to sell a house. The commission was considerable, yet she received only a bottle of Johnny Walker. We do not even drink the stuff!
When we created, I was willing to foot the bill and write off for the experience of doing it. The ultimate selling for part of the shares was merely an added bonus.
Be clear, very clear what the exchange is. Money/hour is not ideal, dividing the pie later is.
Write an early memo of understanding. Not legally binding but clarify what we expect from each other.
There two extremes to be avoided:
1 The Louse: sticking onto and never let go. Zillions of emails and phone calls and coffee shop chats.
2 The Fader: They tend to misuse you and then bit by bit fade into thin air.
A good relationship, also in business, is to be there when needed. To know that less is actually more and to keep the principle of Fair Exchange alive and well.
1 Keep on talking
2 Share fears and dreams
3 Educate on asset classes
4 Separate UK and RSA approaches
5 Proposals for each
6 Debate
7 Implement/walk away
If implementation:
A clear deployment plan with definite spin out points to build trust yet not to be stuck in an uncomfortable situation.

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