Q&A 015

Published on:
December 16, 2020

Hi All,

This final newsletter for 2020, we dive into some big challenges for economy and ecology (should you come up with brilliant solutions over Christmas, be sure to let us know!), an upbeat view on 2021 and finally a lens for compassion. We will be taking a short break during the Christmas holidays and will be back in your inbox on January 6th. In case of withdrawal symptoms, you can always browse earlier editions in our archive 😀. Enjoy!

💰🌳 Big Business

One of the few upsides to Brexit might be the fact that the United Kingdom will be able to define their own agricultural policies. The Economist writes about its future as the UK wil be leaving the Common Agricultural Policy (CAP) this January 1st, after 47 years.

They explain how the policy has been subsidizing intensive farming methods, at considerable cost to the taxpayers, causing a lot of ecological damage. The originally intended goals behind the CAP, boosting food production, has not been making sense for decades.

Switching existing subsidies to behaviour that is beneficial for ecology and the beauty of the countryside (Britain is quite unique in considering the beauty of its farmed land as evidenced in tons of British poetry) can now be designed without EU interference. Smaller subsidies on these types of desired behaviour have shown to work beautifully with the farming community so far.

The same issue of the Economist reports on the rapid deforestation in Brazil, which makes the discussion on subsidizing Brazil for conserving rain forest all the more interesting. I must admit that originally, I felt some reluctance towards this idea ("They should do the right thing because it's the right thing" and "Why should they get free money just for having the rainforest"). An analogy with oil helped me see things more gently. The Middle East has been paid handsomely for supplying us with energy for decades. Now that cleaning Carbon Dioxide is key to our survival, why shouldn't we pay Brazil handsomely to do part of it for us?

⚖️ Top 10%

Mr Market is always right. At least, that's what's commonly said. But what if Mr Market is essentially only a limited number of people?

According to economic data from the Federal Reserve Bank of St. Louis we could argue this is the case. For the past 30 years, more than 80% of the US equity market has been in the hands of only 10% of the market players. The top 1% now even owns over 50% of the US market.

This chart has several implications. Any movement in the price of US equities is mostly appropriated by a few investors. Another implication is that relatively few players can exert influence over the price. Perhaps they're even able to influence market policies set by authorities given their buying and selling power.

There's another side as well. Some of the very large investors are mutual funds, which are often investing the money of insurance and pension funds. Indirectly, a lot more people could therefore have an influence.

It is worth pondering whether we believe this is a sustainable market system. I do not readily have an alternative. At a minimum, I remain cautious whenever someone refers to the market as the main guide. It represents an important opinion, but this doesn't discharge us from conducting our own due diligence.

◼️🦢Predictions

By the end of November, my inbox fills up with memos and reports on what the next year will bring. The reports are always upbeat and full of potential chances and new key trends. Hardly ever do the writers of these reports reflect on their previous year's predictions. Obviously, when looking back to 2020, most (if not all) predictions were wrong.

This time, things may be (slightly) better. Certainly when you believe in old wisdom and superstition. Indeed, 21 is the number of luck. It comes back in regulations, gambling and taking chances. In many countries, 21 is the minimum age at which you're allowed to do many 'adult' things such as ordering alcohol or entering a casino. Once in the casino, you can play a number of card games in which the number plays a vital role like blackjack. When rolling the dice, you'll notice that the sum of all the spots on a standard die adds up to 21.

We'll see what '21 brings. Socially and healthwise, it almost cannot get worse than this year. Economically and financially, it seems to really depend on the speed at which we're able to make Covid a thing of the past. All 'experts' seem to agree that solid economic growth will return to all countries. Whether you benefit from this, seems to depend on which industry sector you're active or invest in. Maybe you're lucky!

🔍🎄Reflection

I've been enjoying the latest guests to Tim Ferriss' podcast a lot these past weeks, and Spotify CEO Daniel Ek was no exception. They talk extensively on the mental models Daniel uses to run his company. One thing I found particularly interesting is Daniel's view on the qualities he looks for and encourages in his hires. It reflects his belief of an ever changing world:

"I value agility and learning way more than I value the fact that you’re really good at your job and really good at doing a few things."

On Tim's famous question "If you could have a billboard anywhere, saying anything, what would it say and where would you put it?", Daniel responded:

"Be kind; everyone is on their own journey."

He goes on to explain why talking about his own growth and mistakes helps in demonstrating that to be true of himself as well.

"I’ve encountered so many faiths and life situations, certainly over the last nine months ago where I’ve learned so much. I learned about issues I didn’t even know existed. I learned about situations and the hardships, but also successes and happiness as well, so all of those different things. But what it kind of reminded me of is that we’re all on our own journey."

I think that is a lens for viewing the world around you that's worthy of some extra use this holiday season.

That's it for this week! If you got forwarded this newsletter and like what you read, click here to sign up.

As always, we would love to hear your thoughts and tips. Just reply to this e-mail to get in touch with us.

Even if you do not get to spend as much time with family and friends this Holiday season, we hope you will have a reflective period before jumping into the new year.

Stay safe,

Quinten & Alphons