Future Skills

The Future Skills Program

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The most important thing in life is your health. Health starts with sleeping well. Actually, without it you’ll die (Why We Sleep, Matthew Walker).

Sleep, like food, is one of very few things evolution just can’t get rid of. Despite the huge downsides to lying unconscious and defenseless in nature among predators and parasites, humans on average do it one third of their lives.

The Health And Financial Freedom loop

In order to control your time enough to sleep the way you’re intended to, you need financial freedom, lest there will always be a boss or a client making demands on your time when optimally you’d be sleeping or playing.

Further, attaining economic independence through a specialist, entrepreneurial, leadership or investment career in a world of accelerating technological development means you need as agile a mind as possible.

Enter sleep and play:

Research done during mainly the last two decades (c.f. the amazing books “The Real Happy Pill” and “Why We Sleep”) increasingly show the importance of regular exercise and sleeping well for strenghtening our cognitive capabilities (coping with stress, anxiety and depression, increasing your focus, memory, creativity, and happiness; and combating and postponing dementia). Proper nutrition, not least for promoting a healthy and diverse microbiome, is also an important part of shaping a future proof and capable mind-body machine.

So you can see how you need sleep and exercise to boost your financial standing; and economic independence to optimize your sleeping habits and general health.

Creating the Future Skills Program

Since I left the finance industry (I was a portfolio manager at a very successful hedge fund for 15 years: Futuris – The European Hedge Fund Of The Decade), I’ve spent a considerable amount of time thinking about what made Futuris not just great, but the greatest money manager in Europe for a full decade.

From the Future Skills Program (Finance Module)

Over the last year, I’ve finally come around to distilling my investment insights into a series of videos, with accompanying detailed course notes and exercises.

Three decades of investing lessons and best practices distilled

In the Future Skills Program, I explain the investment methodology and practices I’ve honed during the last 30 years.

They include what I’ve picked up from business school (M.Sc. in Finance at SSE 1990-1994), as a financial analyst specializing in IT and investment companies (1994-2000), as a portfolio manager (2000-2015) with focus on software, services and finance, and finally as a private equity investor 2015-2019.

From the Future Skills Program (Finance Module)

A robust health, sound decision management practices and career planning are as integral to designing a good life as investing prowess. Therefore, I and my partners have put together a complete Future Skills Program, including chapters about networking and career advice, value investing and personal development. I’m in charge of the Advanced Career (6) and Finance videos (16).

Please note that I’ve hesitated to participate in creating this course. All the topics discussed are complex matters without simple answers. The course details what you need to work on and in what direction to focus your energy, but you’re still the one having to put in the dedication and work.

We can only show you the door, but it is you who have to walk through it.

If you’re ready to take real responsibility for your life, career, risk management and finances, check out the course program in detail here:


Why you can’t recall changing your mind

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Topic: You keep changing, but you keep forgetting you do

Conclusion: You can bypass some of your evolutionary mismatches by keeping smart records of the self

Length: very short

You are different

You were a different person twenty years ago. You had other habits. You thought other thoughts. You reasoned differently. You harbored different beliefs. In short, you have changed your mind since then, whether you realize it or not.

Typically, it’s difficult to remember clearly that you actually were of a different mind, unless you have actual tangible records for reference. If you are a mindful and highly metacognitive person you might be able to do it, but not without a certain amount of effort.

The different yous are like different religions or cultures

In my conversation with serial entrepreneur Ola Ahlvarsson on my podcast Future Skills a few weeks back, Ola talked about observing the world through different cultural lenses. Among other things he said it’s very dificult to truly understand a different culture. We are trapped within our own cultural box of , e.g., believing in “freedom”, “pursuit of happiness”, “individualism”, “socialism” or “martyrdom”. Within that box it’s all but impossible to grasp what’s inside another box without ending up in that box instead.

One thing that really struck me was Ola’s claim that many people in the western world think that an Islamic State warrior probably would come around to our views of freedom and justice with the right amount of education. However the IS warrior might think the same about us. We just don’t understand each other, and a little education doesn’t fix that gap.

Ola makes a much better job at explaining the concept than I could ever hope to do, so do check it out on any podcast app you like (here is a link to the iTunes page). It’s the podcast Future Skills, episode #10.

Evolutionary mismatches

I recently listened to a science show about the self, and the memories of the self. The host talked about how there aren’t any evolutionary advantages in remembering being a different person. On the contrary, much of the conscious self is occupied by continuously adapting its narrative and back story to fit with current events. Being a person is mostly an illusion, an afterthought made-up to keep us safe and sane.

Unfortunately that’s an evolutionary mismatch with the modern world, since being of a fixed state mindset makes us less prone to trying new things — since we assume we are static anyway. In Future Skills we devote a lot of time to analyzing mismatches between our prehistoric brains and the modern world, as well as suggest ways around them and our numerous and counterproductive psychological biases.

In short, Future Skills is there to inspire you to make yourself future proof in a world of accelerating change.

Another interesting avenue of thought was how we judge ourselves based on our thoughts, but other people based on their behavior. Sure, we don’t have much choice about others, but in theory we could judge ourselves based on our behavior rather than our thoughts. I actually try doing that myself sometimes, not least during interviews: “I think I want A but it turns out I most often choose B, so I guess my personality really is B rather than the A I otherwise assume”. It still feels weird, however, thinking I am A, but having to say I am B based on what a past version of me simply happened to do rather than the very tangible thoughts I am having now.

Take aways — embrace change

Here are a few things you could do to map out your changing personality and take advantage of the information gleaned from the exercise:

  1. Keep a diary of your thoughts, decisions and beliefs — it will become increasingly interesting and valuable as the decades pass.
  2. Analyze your past behavior (which could be inferred from photographs and other records)
  3. Remember that just by internalizing the fact that you do change, will increase your propensity to try new things and adapt even faster to your environment — a superpower in the way the world works in this century
  4. Check out my podcast Future Skills for more inspiration through our three different show formats (10-minute future skills tool episodes, half-hour long expert episodes, e.g., #12 about entrepreneurship, and longer format guest shows)

 

Without precise definitions you end up in forecast hell

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Topic: Imprecise definitions lead to useless models and conclusions

Discussion: If you’re performing macroeconomic research, which inflation are you talking about, which growth, which interest rate? The answers to those questions can be of crucial importance for your eventual investment outcome.

Length: Short — maybe 5 minutes reading time

Teaser: It’s easy to predict the weather. Not to mention stock market returns

PODCAST TIP: listen to my latest podcast episode (#6) on Future Skills with philosopher Alexander Bard. We talk about definitions of infantile grown-ups and much much more. Check it out on iTunes here, or your favorite Android app here.

Dream Warriors

Are you dreaming about making perfect economic forecasts, and using them for producing amazing equity investment returns? How does this sound to you:

Weather and production bottlenecks in combination with monetary policy induced growth are starting to cause higher commodity prices. Inflation is already showing in their wake. People worry about rising interest rates, just take a look at OIS spreads. Some central banks are turning less dovish. Higher interest rates means less funds for investments, lower growth, lower profits and lower share prices. Higher interest rates mean lower bond prices, higher borrowing costs, lower real estate prices among other things. Higher inflation means money loses its value. And this time it’s at a time you can’t hide in stocks or bonds. You could hide in gold. One bar of gold is always one bar of gold. Maybe that’s why the gold price in dollars is rising (despite obvious manipulations and jaw-boning from various authorities).

Does the above fit your view? Higher commodity prices => higher interest rates => sell stocks, bonds and real estate and use cash to buy gold and soft commodities, until the cycle turns again?

Well, hold your horses for just a little while.

What’s your definition of a boombastic jazz style?

Which commodity prices are you talking about exactly, when you say their prices are rising? Wheat, hogs, orange juice? Iron ore, coffee, cacao? Silver, cobalt? Platinum, palladium?

Similarly, which interest rates are you referring to? The Fed funds rate? Treasury bills, longer term bond market rates? Corporate bond rates, bank lending rates (to consumers, to corporate clients, to house builders?), peer to peer lendning rates? Intrabank market swap rates?

Oh, I almost forgot, “inflation” you said. Would that be the (ever manipulated and ever changing) CPI measure? Or the PPI gauge? Input our output PPI? How about house price inflation numbers? Or energy price inflation? Avocado prices?

My point in this post is that if you don’t clearly define exactly what variable you are talking about it becomes exteremly difficult to make any kind of coherent analysis, not to mention draw any practical conclusions whatsoever from the exercise. Macroeconomic research is difficult enough as it is without averaging everything together, whether it be “the inflation”, “the interest rate”, “the oil price”, “the stock market” or “GDP”.

Take that last one, e.g., GDP. What does Gross Domestic Product really tell you? What conclusions can you draw from it even if you knew its exact trajectory going forward a few quarters? How about nominal GDP vs. real GDP (using which deflator measure?), or GDP per capita? Then there are data series for wages, wage growth, hours worked, hourly wages, lost jobs, added jobs, seasonal adjustments (many orders of size larger than the actual net number), employment (measured in at  least three different ways depending on, e.g., how to define somebody without a job, based on whether he’s searching for a job or doesn’t care).

And what’s so special about GDP growth by the way? There’s zero useful correlation between real GDP growth and stock market returns. How about a house price recession like the one that began in 2006, several years before the ‘actual’ recession. Don’t even let me begin to talk about the NBER’s definition of a recession (no it’s not “two quarters of contracting real GDP”

 

“a significant decline in economic activity

spread across the economy, lasting more than a few months,

normally visible in real GDP, real income, employment, industrial production,

and wholesale-retail sales.”

 

No matter the problems of making macroeconomic models work at all, you don’t want to make it even harder by using impractical and vague definitions. My message in this post is that you need to make sure your definitions are practical and at least theoretically can lead to better decisions.

After that we can talk about the ephemeral character of macroeconomic causations and correlations, not to mention their flimsy associations with actual stock market behavior.

For now take this with you: Knowing what you know and knowing what you don’t know, is paramount in uncertain environments. And the financial markets are as uncertain and stochastic as they come.

Thus, make sure you do define all concepts and ideas about their connections precisely. That’s your only chance of keeping track of what you know and what you don’t. In addition, it’s your only fair chance of creating a feedback loop of increasing knowledge and strategy adaption.

Such directed or deliberate practice is in similar fashion your only chance of coming out on top in the arguably most competitive sport known to man (and yet untrained newbies gladly step into the ring and bet their life saving’s on themselves).

Today’s advice holds true for everyday life as well. I don’t know how many arguments with friends I could have saved, had we only defined the concepts and words precisely at the outset…

Stock market forecasts coming up

I’ll soon write a follow up on this article, where I’ll explain how stock market returns can be reliably forecast in much the same way as the weather can be accurately forecast. For now this teaser will suffice:

Just as I know there’ll be snow in the middle of Sweden on quite a few days every year between December and February, and almost completely certainly no snow 99 per cent of the time between June and August; a highly priced market will produce very low rates of return, and a lowly priced will produce high rates of return over the coming decade or so. But more detailed notes about next time and the exact implications for the current situation. Stay tuned.

FUTURE SKILLS: Don’t forget to check out the super energetic conversation with Alexander Bard on Future Skills Ep. #6! You’ll find it on iTunes here, or your favorite Android app here.