I know what you’re thinking, he’s run out of things to talk about (fat chance) and he’s stooped to making up words. While I understand the sentiment “Ergodicity” is a real word and the title of Researcher and Author Luca Dellana’s recently released book. Simply put Ergodicity is the study of a broad range of systems that occur in physics and geometry. Don’t panic, there’s a simpler way and if nothing else, this rural Florida bumpkin loves him some simple. Ergotics for our purposes, is the study of survivability. The survivability of us as humans and more importantly the survivability of the community and the species, but as it relates to you and I, the survival of your wealth.
Some folks say that Warren Buffet and Charlie Munger are geniuses or Gurus if you will. Some say they’ve been lucky or have dogged determination and grit. I say, they’re old. Now before you get all offended for them, I suspect they know they are old and I am not dismissing the many skills they have. That all said, many folks are smart and tenacious but have nowhere near the financial success of Charlie and Warren (we’re on a first-name basis of course). What Warren and Charlie have in addition to a strong acumen for investing, is an Ergotic approach to life. To survive is to thrive. Two-thirds of their wealth was gathered after both men had reached the age of 60.
What does this have to do with us non nearly a century-old non-Billionaires? A lot, I would argue. Many folks who have made and accumulated a decent amount of wealth struggle once their careers come to an end and they are now tasked with “maintaining “the money. Author Morgan Housel is fond of saying that “accumulating wealth” and “maintaining wealth” are two very different skill sets. Maintaining wealth is purely a matter of survival. I have this much money and I need it to produce income or supplement my retirement over the next 30 years if I’m lucky. Many folks think this process is the same as making and saving money…it is not. Making and saving money is about full-on narrow and non-diverse thinking. I’m all in on my education as a ____________ your profession here, or going hard into the savings mode in my 401k and or other similar vehicles. If you had not fully narrowed your focus and energy you would likely not have saved the money you did or sold the business that has now resulted in the wealth you now need to preserve. Maintaining wealth is a completely different process and where “Ergotic Thinking” becomes critical, to succeed is to survive plain and simple.
In his book, Luca describes a situation with his cousin who was a downhill skier. The cousin was without a doubt the fastest skier in his community. The problem with his cousin was that he also was never the most successful skier in his community primarily because he was often hurt due to the reckless nature of his skiing. In short, he was fast, but he was not successful. He did not survive practice rounds or preliminary races to get to the championships most of the time. Luca’s cousin was not “Ergotic” in his approach.
To continue the analogy many of you think you want the fastest time, or in this case the highest return, so you pivot to every headline stock or idea that you think will get you to the bottom of the hill the fastest. What you don’t realize is that you can win the championship not by skiing slowly or investing overly conservatively, but by skiing or investing just fast enough to excel, but more importantly, survive.
History is full of fast skiers, Enron, Subprime Mortgages, Tulips, Dot Com stocks, and most recently Meme stocks. Skiing fast or investing aggressively are more than okay when done within an Ergoctic framework. Buying the “hot Crypto” or your brother and laws hot stock is fine, as long as you have an Ergotic base to allow for that stock to tank or that brush with the gate halfway down the mountain.
If you have 80% of your money built for survivability and the avoidance of ruin, you’re good to go on the crazy crypto idea of the day. It’s when folks get out over their skis and go all in that ruin is a factor. Ruin can NEVER be an option for a retiree or even a late-stage pre-retiree. Ruin is game over; ruin is back to work or greeting folks at Walmart. Once ruin is removed from your options (as best we can do that) getting up on an occasional edge to gather speed is okay and in fact ideal.
In short (too late I know) we, you and I must first design our run and then determine how we survive before we can determine how to excel. The truth is that the former is 90% of attaining the latter.
Peace,
Scott