The Arab World: Lessons From An Attitude For Investment

The Investor's Game

Benjamin Graham one of my all-time favourite investors and mentor summarizes in 'The Intelligent Investor' who an investor and what an investment is. He tried to group the peripherals into two: an investor and a speculator. I add a third, a trader. That makes three entities to this: An investor, a speculator and a trader. The investor is the one that makes a commitment in anticipation for a dividend or appreciation in value: they are mostly certain about the future outcome of their investment. That does not necessarily mean their investment may turn out as predicted. A speculator on the other hand makes a prediction on whether or not an asset will appreciate or depreciate. They can in investment terms borrow, sell and buy back when the price subsides. The trader however buys and sells. The distinction here is the trader does not borrow, sell and then have the intention to buy back. Let's take it to the basics of trading. Traders buy and sell. After selling, they do not have the intention to buy back when the price falls. That gives us the three main forms of investment that can be made especially in financial terms. Other resources and investments in kind aren't different either. Most investments units in these forms, can be classified same: the investor, the speculator and the trader. The investor, mostly have conducted some research or is privy to some form of information that isn't ubiquitous. Their choice and direction mostly lead to profitable results and outcomes. They have insights that eludes the populace. The investor in this case, expects some return to their investment not necessarily as was given, sometimes, it's just about the accomplishment and fulfillment. The second, speculator. They sometimes have insights. They seem to make predictions, they do not necessarily expect an appreciation in the value of their investment. Some just borrow mostly legally, sell and hope for a depreciation in value then they buy back. Thus they expect just to be the winners not about the increase or decrease in the value or the resources or investments in kind they part with. Finally, there is the trader. These persons 'buy' low and usually sell at a margin, making 'profits' in the process: in this case benefiting from the process. These three entities can be found all over, in schools, governments, stock exchanges, markets, our communities, on social media and even in modern churches! The investor's game is what is of the essence and people should be on a look out for. Traders should be admired and valued, for speculators being conscious or mindful of them and their procedures should be of paramount interest to investors, investment proprietors and the investee.

Peculiar Financial Investment

In the modern world investments come in several forms especially financial terms. Investment funds currently are becoming ubiquitous. Some handy examples, pension funds, university endowment funds, hedge funds, private equity and more recently, national wealth funds dubbed, sovereign wealth funds. The sovereign wealth funds of countries like Abu Dhabi, Saudi Arabia, China, Singapore and Norway to name a few are the new masters of financial investment. Currently, the largest sovereign wealth fund is Norway's Sovereign Wealth Fund. Norway's pension fund, was set up to mainly act as a heritage for current and future generations. A parallel, Ghana's Heritage fund. The fund's primary goal is to channel the income generated from oil sale among others into viable investments in anticipation of some returns. This is per the funds stated goal and name: Government Pensions Fund Global to "invest in international markets so the risk is independent of the Norwegian economy". They thus invest in companies and treasuries oversees through acquiring mainly equity or bonds. The fund is to promote investment abroad while maintaining and sustaining local business. The funds operations ensure the investments carried out by the fund is in line with social, environmental and sometimes government policy. It was first introduced in 1990, to invest in avenues, then the ventures' return help sustain current and future generations. However, Norway's case for instance has exposed the negative externality that may result from the success of these investment funds: decreasing government outcomes and citizen outputs. The fund acting as a cushion has resulted in unexplained laxity. This presupposes a need to apart from the traditional investing, finding alternative and cushioning practices for these wealth funds as the capital base of these states are being cushioned. This thus is applicable to all forms of wealth. By disregarding the cushioning of human resource amidst concentrating on capital resource, there is the likelihood for a potential system gap like in the case of Norway, waiting to be addressed: relaxed governments and relaxed population
base. Sovereign Funds thus present new opportunities for investments and investees an avenue to explore and attract capital that looks potentially promising.

When to Invest

The time to invest is one of the most critical points of investors' decision process. Whether it is to invest in cash, resource or kind. The investor and the investee are at critical points in every investment cycle, they decide most generally the turn of events. Although certain factors also influence the output of an investment, the investor's journey just begin immediately the investee accepts a partnership. From that point onwards the two have an obligation, to ensure parties to the partnership are satisfied until these two part ways. A critical or inflection point in the investment cycle is the stage to make an investment. Let's consider these three scenarios and juxtaposition it to other investment types. The Swedish Commercial Paper, the Dutch Tulip bubble and the Bitcoin revolution.
The Swedish Commercial paper that formed part of the recession of the late 1980s to early 90s in Sweden is a typical scenario of hands tied on when to invest. The commercial paper received widespread acceptance and investments, unfortunately, during the time for honouring, the financial institutions were in some distress and hence failed to honour the terms. The commercial paper's case is a typical example of an investment error rather than an investor error. In this case no matter how early or late the investors were, the financial institutions inability to honour the returns meant the investors were at a loss. That can be juxtaposed to the Dutch Tulip bubble. Early purchasers and adopters of the Tulip and tulip bulbs saw an astronomic rise in the price of the Tulips, cashing in big time on their investments. The prices kept increasing and increasing till the bubble burst. The not so greedy cashed out before the burst and enjoyed the exponential price increase. The doubters that never invested had their money safe: at least they had their principal less any inflationary move. Those on the extreme side, led by extreme greed and the bubble bursting meant their money went with the burst, leaving them with little to nothing but Tulips and contracts that was almost worthless. The Bitcoin revolution is a final example in this scenario. In 2010, Bitcoin was worth a little below $1. In 2016/2017 when I first explicitly met a seller of Bitcoin, the price was hovering around $1000 then in cedi terms almost GH¢ 4500. Well I thought why not mine during the original quest among others. Today Bitcoin is worth about $70,000. The price rose to almost $120,000. I could have cashed in big time if I had invested with the little cedi I had. Those that saw the "potential'' late, I mean in 2020, still were able to cash in, on their investments in 2025. Currently, there are skeptics and there are strong backers. The conclusion to be drawn is, time is always of the essence. Better late than never may not necessarily be something the late Dutch Tulip investors and sellers will want to hear.

Who you should vouch for

Choosing a cause of action from alternative causes of action is one of the most vital or to search for a better word critical part in any ecosystem. It's very difficult to come to know who you should vouch for. Its almost always a difficult discretionary exercise. This comes in handy, the investment concept I call the V Investment Criterion. The formula follows below,

V Investment Criterion

Investor Request fxn + ∆(Speculative incidence + Noise Threshold) ≦ Investee-investment fxn + Reactive incidence.

Mathematically,

Γ(xi) + ∆(ω[zj]+Ф[An]) ≦ϒ(yk) + β (Bm)

Where,

Γ, ∆, ϒ, β, ω, Ф are functions on the parameters, xi , zj, An, yk, Bm respectively, the parameters An and Bm are sequences/series, xi, zi and yi are vectors and ≦ is a relation

(See more below the article)

The back turn to a blame game

When an event doesn't go in your favour, the average human must in other to save face, find an issue or an underlining for the negative turn. Most people have three reactions to negative life occurrences. Accept defeat and move on. Accept defeat and call it quit or Accept defeat and gear to a blame game. To ponder on these individually, an individual that accepts defeat and moves on usually is a master of their own 'game'. They are usually architects of their paths. They consider opportunities as stepping stones. When a stone has no path to further a journey, they tend to find other stones, maybe rocks, sometimes slabs and bridges. These people are usually optimistic in the sense that they feel you cannot be defined by just one occurrence. Life happens and the strong and worthy get going. The story of the founding of Microsoft as told by Dagogo of Cold Fusion has these two personalities/entities: IBM and Gary Kildall. IBM was consistently persistent on Bill Gate for a program to run on their new yet to be commercialised PC, Gates on the other hand recommended Gary as the ideal candidate for such a project. Bill was optimistic Gary was the right man for the job. IBM then proceeded to have talks with Gary: then, one of the most sought after PC software creators, His CP/M operating system was a top notch system for its era. Persistent as IBM was to get a new or enhanced version from Gary through Gates recommendation turned out to be nought. IBM thence went back to Gates to see if he could at least create a version for the yet to be built IBM PC, he reluctantly agreed after several deliberations. The rest they say is history. IBM can be considered as a typical entity that accepts defeat and moves on. However they considered that defeat as a path that led nowhere and found another 'slab' in Bill Gate, they proceeded: history was made thereafter. Those that accept defeat and call it quit are to search for a better handy example, the talented Gary Kildall. Gary then was at the pinnacle of Computer science and PC software expertise. He was told of the disregarded opportunity and how Bill Gates has been contracted in his stead. He was downtrodden, he had a life changing opportunity just slip through his hand. Falling into depression: he decided to call it quit. This is a typical example of an individual that accepts defeat and then can't bare any burden but to quit, mostly in its entirety. The third group are those that after defeat tend to find an entity to slap their blame on. It was the school, the teacher, the environment and what have you. These people must certainly have something to pit their failures on. Gate recovered from a previous blunder by swiftly acting to save himself and Microsoft. IBM too. Recovery is mostly of the essence. Those that are blamed become potential foes receiving unmerited shots. The true mark of recovery is the acceptance of failure or defeat and proceeding to potential viable path. If for nothing at all there is always joy in doing something and failing than doing nothing and still failing.

Making it work after all

The most difficult aspects in combining these individual stance: that of an investor, speculator, trader and a founder/investee to a known trajectory is to find where they are all in harmony. You have to know when a speculator is right, the founder/investee is right and the investor is also right. When they are in sync, there is a high probability to a foreseeable success. Most investments are positively skewed. Or should I say are structured for a positive growth. When an investment produces the expected results, all parties receive pats on their back, otherwise, those that had events turn against, have to decide their fate!

Aside: The V Investment Criterion is used for investment purposes by parents, guardians, schools, teachers/lecturers, investors, investment funds among others. Ask to find out more or ask me on Ensurance .