Capital Allocation Quotes

Nature is the greatest capital allocator.

Every tree in every forest is participating in investment activities….. capital allocation, energy flow, resourcefulness, utilization, leverage, information distribution, growth, value creation, and ROI…. Nature is an economy, and every tree is an investor in that economy. Sometimes I just sit in my back yard, observe, and take notes.

Nature is really good at capital utilization, capital allocation and capital productivity.

In a permaculture economy, all capital is productive capital and all resources are efficiently utilized.

Every business problem corresponds to a failure in capital allocation.

Capital allocation is what makes all business processes possible.

Nature is really good at capital productivity and capital allocation. Every leaf on every tree is positioned to maximize photosynthesis. Every root on every tree is positioned to maximize nutrient sequestration. And all of the leaves and all of the roots live in service to each other.

If there are gaps of unproductive capital in the system, everybody loses. And when capital productivity is maximized, everybody wins.

Simply by striving to efficiently utilize all capital everywhere, we will by default solve a multitude of problems in society.

When the human species figures out how to efficiently utilize capital, many of the problems that have haunted us for a long time will cease to exist.

Efficient capital allocation is all about flow.

Capital allocation is about getting resources where they need to be so that they can have the opportunity to be productive. If capital isn't wisely allocated, it can't be productive. And if capital isn't productive, civilization collapses.

What we are doing at Mayflower-Plymouth is facilitating the efficient utilization of capital.

Capital is a lot like people; it needs to be employed.

Logistics management and supply chain management are just different ways of saying capital allocation.

When we talk about capital allocation, we're talking about all kinds of capital - financial capital, social capital, biological capital, human capital, intellectual capital, etc. Capital just means resources, or things capable of producing value.

At Mayflower-Plymouth, we approach Asset Management from a network and systems perspective as opposed to from just an entity perspective. We learn from nature and we look at how the mycorrhiza network is a manager of Capital and an allocator of Capital, both a means and a method - and we try to operate in the same way.

The accumulation of capital is a good thing. When we look at nature, we see the accumulation of capital everywhere. But accumulated capital usually works in harmony with the productivity of capital. Plots of soil work in harmony with the forest; and each exists in service to the other.

Everything we do at Mayflower-Plymouth is viewed through the lens of capital allocation. Whether it's Blockchain or Quantum Computing or DeFi or Additive Manufacturing or Logistics, we channel that toward helping businesses fulfill solutions and solve problems concerning the allocation of capital.

When we ask ourselves what is an economy; I think the best place to find the answer to that question is in a forest. Go and sit in a forest and observe with all of your sensory faculties, and meditate there. And while you're observing and meditating, ask yourself questions about everything. And if you want maybe hit a few puffs of a certain herb while you're meditating there. And you'll find out exactly what an economy is. And you'll also find out exactly what business is. And all of the economic and business concepts like capital allocation and liquidity and service and profit and growth... It'll all start to make more sense as you sit there meditating in that forest.

Every problem that exists in the world exists at least in part because capital was not efficiently allocated.

Look at nature. The most urgent priority is the allocation of capital.

Biological life is simply the continuous allocation of capital within an ecosystem.

What keeps an economy alive is the continuous and efficient allocation of capital.

The way mycelium produces enzymes to break down complex organic polymers into simpler compounds is a case study for how we can upcycle products and materials in our economy.

Understanding needs is an important part of capital allocation.

At Mayflower-Plymouth, our purpose is to help businesses fulfill solutions and solve problems concerning the allocation of capital. And we do that by modelling mycelium fungal networks.

When society as a whole begins to efficiently utilize all capital everywhere on a global scale and and make all capital everywhere maximally productive on a global scale — most if not all of our global scale social problems will be solved.

Every Spring, nature teaches a class on business entrepreneurship. ....We see how capital is re-allocated, currencies are re-directed, growth is re-emphasized, and numerous life forms promote their value with re-vitalized marketing programs that implement flowers or seeds or aromas or habitability or pollination in an effort demonstrate a unique value proposition in a busy economy.

One glance at any government budget anywhere in the world tells the story—the money is always in place, already allocated, the motive everywhere is fear, the more immediate the fear, the higher the multiples.

It means this War was never political at all, the politics was all theatre, all just to keep the people distracted…secretly, it was being dictated instead by the needs of technology…by a conspiracy between human beings and techniques, by something that needed the energy-burst of war, crying, “Money be damned, the very life of [insert name of Nation] is at stake,” but meaning, most likely, dawn is nearly here, I need my night’s blood, my funding, funding, ahh more, more…The real crises were crises of allocation and priority, not among firms—it was only staged to look that way—but among the different Technologies, Plastics, Electronics, Aircraft, and their needs which are understood only by the ruling elite… Yes but Technology only responds (how often this argument has been iterated, dogged, humorless as a Gaussian reduction, among the younger Schwarzkommando especially), “All very well to talk about having a monster by the tail, but do you think we’d’ve had the Rocket if someone, some specific somebody with a name and a penis hadn’t wanted to chuck a ton of Amatol 300 miles and blow up a block full of civilians? Go ahead, capitalize the T on technology, deify it if it’ll make you feel less responsible—but it puts you in with the neutered, brother, in with the eunuchs keeping the harem of our stolen Earth for the numb and joyless hardons of human sultans, human elite with no right at all to be where they are—” We have to look for power sources here, and distribution networks we were never taught, routes of power our teachers never imagined, or were encouraged to avoid…we have to find meters whose scales are unknown in the world, draw our own schematics, getting feedback, making connections, reducing the error, trying to learn the real function…zeroing in on what incalculable plot? Up here, on the surface, coal-tars, hydrogenation, synthesis were always phony, dummy functions to hide the real, the planetary mission yes perhaps centuries in the unrolling…this ruinous plant, waiting for its Kabbalists and new alchemists to discover the Key, teach the mysteries to others…

A lot of folks look to non-profits as platforms to solve major societal scale problems. But the major capital allocators like banks, Hedge Funds, Venture Capital firms and so forth - these are the kinds of ent that have the capacity to affect real change.

A lot of folks look to non-profits as platforms to solve major societal scale problems. But the major capital allocators like banks, Hedge Funds, Venture Capital firms and so forth - these are the kinds of entities that have the capacity to affect real change.

Here is an all-too-brief summary of Buffett’s approach: He looks for what he calls “franchise” companies with strong consumer brands, easily understandable businesses, robust financial health, and near-monopolies in their markets, like H & R Block, Gillette, and the Washington Post Co. Buffett likes to snap up a stock when a scandal, big loss, or other bad news passes over it like a storm cloud—as when he bought Coca-Cola soon after its disastrous rollout of “New Coke” and the market crash of 1987. He also wants to see managers who set and meet realistic goals; build their businesses from within rather than through acquisition; allocate capital wisely; and do not pay themselves hundred-million-dollar jackpots of stock options. Buffett insists on steady and sustainable growth in earnings, so the company will be worth more in the future than it is today.

Every Spring, nature teaches a class on business entrepreneurship. ....We see how capital is re-allocated, currencies are re-directed, growth is re-emphasized, and numerous life forms promote their value with re-vitalized marketing programs that implement flowers or seeds or aromas or habitability or pollination in an effort demonstrate a unique value proposition in a busy economy. Smart entrepreneurs enroll in this class every Spring and take good notes. Whether you're an entrepreneur of a small business or an entrepreneur of a line of business within a large company... learn from nature.

There is only a certain amount of wealth in the world, this thinking goes. Economics is a matter of acquiring and allocating, not creating. This was the view of the world’s smartest people, all top philosophers and not stupid people, for many thousands of years before the age of the enlightenment. It still is.

All stakeholders should benefit from the capital we allocate in our portfolio.

All stakeholders should benefit from the capital we allocate in our portfolio, on a net value add basis.

When supply can't keep up with demand or demand can't keep up with supply, it's indicative of waste in the form of misallocated capital.

Every business problem has a correlation to the allocation of capital. To help businesses allocate capital is to indirectly help them solve a variety of other problems.

In essence, the role of a logistician is to efficiently allocate capital.

For his successor, Buffett emphasized that proven capital allocation abilities would be the key.

Economics is the art of allocating scarce goods among competing demands. The conceit of Marxism was the thought that in Communism, economics would be "abolished"; this was why one did not have to think about the questions of relative privilege and social justice. But the point is that we still have to think about economics, and probably always will. The question, then, is whether we can arrive at a set of normative rules which seek to protect liberty, reward achievement and enhance the social good, within the constraints of "economics".

In natural ecosystems, the primary role of the mycelium network is the allocation of capital. That's how the mycelium network helps facilitate the success of all other participants in the ecosystem. At Mayflower-Plymouth, we're doing the same thing in business ecosystems.

Every problem that exists in business exists at least in part because capital was not efficiently allocated. Or, at least the problems could be solved by allocating capital more wisely.

The financial markets paid a lot of people extremely well for narrow expertise and a few people, poorly, for the big, global views you needed to have if you were to allocate capital across markets.

One of the most important decisions any CEO makes is how he spends his time—specifically, how much time he spends in three essential areas: management of operations, capital allocation, and investor relations.

Every problem in society is caused by or correlated to the inefficient utilization of capital. How do we solve the problems in supply chains? More efficient utilization of capital. How to we solve climate change problems? More efficient utilization of capital. How do we end poverty? The more efficient utilization of capital. How do we improve our education system? The more efficient utilization of capital. How do we transition from fossil fuels to sustainable energy sources? The efficient utilization of capital. Simply by striving to efficiently utilize all capital everywhere, we will by default solve a multitude of problems.

In natural ecosystems, the efficient allocation of capital is a prerequisite for all other success metrics. The same is true of economic systems. The efficient allocation of capital is a prerequisite for all other success metrics.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity. Think of these options collectively as a tool kit. Over the long term, returns for shareholders will be determined largely by the decisions a CEO makes in choosing which tools to use (and which to avoid) among these various options. Stated simply, two companies with identical operating results and different approaches to allocating capital will derive two very different long-term outcomes for shareholders.

The role of soil in natural ecosystems shares striking similarities with the role of capital in economies. Just as soil serves as the vital resource underpinning natural ecosystems, capital is the foundational resource driving economic systems. In both contexts, the effective allocation of resources, whether capital or nutrients, determines productivity, competitiveness, and overall stability.

If you think of capital allocation more broadly as resource allocation and include the deployment of human resources, you find again that Singleton had a highly differentiated approach. Specifically, he believed in an extreme form of organizational decentralization with a wafer-thin corporate staff at headquarters and operational responsibility and authority concentrated in the general managers of the business units. This was very different from the approach of his peers, who typically had elaborate headquarters staffs replete with vice presidents and MBAs.

Science" is itself one of the greatest utopian illusions ever created by humankind. I am by no means suggesting that we should take the path of antiscience—the utopia offered by science is complicated by the fact that science disguises itself as a value-neutral, objective endeavor. However, we now know that behind the practice of science lie ideological struggles, fights over power and authority, and the profit motive. The history of science is written and rewritten by the allocation and flow of capital, favors given to some projects but not others, and the needs of war.

Managerialism has become the pretext for creating a new covert form of feudalism, where wealth and position are allocated not on economic but political grounds - or rather, where every day it's more difficult to tell the difference between what can be considered 'economic' and what is 'political.

Mandatory allocation of capital between bonds and stocks by mutual funds creates tremendous short-term opportunities for investors.

Private property and capitalism also provide strong incentives to preserve resources for the future, whereas political resource allocation under democracy tends toward immediate gratification.

Investors have a role in shaping the world, because everything is influenced by the allocation of capital. At scale and collectively, investors are most responsible for the allocation of capital. While responsibility is to be shared among all economic participants - As investors, we should have a sense of responsibility, and pride, about the societal impacts of our investment choices.

well-functioning market requires all three types of investors for socially beneficial projects to have access to cheap capital. Value investors allocate capital to its most productive use. Speculators, because they trade frequently, provide the liquidity and trading volume that allows value investors and relative value traders to execute their trades cheaply. They also ensure that information is disseminated quickly.

Murphy’s approach to the roll-up was different. He moved slowly, developed real operational expertise, and focused on a small number of large acquisitions that he knew to be high-probability bets. Under Murphy, Capital Cities combined excellence in both operations and capital allocation to an unusual degree. As Murphy told me, “The business of business is a lot of little decisions every day mixed up with a few big decisions.

Now, obviously, Meredith Whitney didn't sink Wall Street. She'd just expressed most clearly and most loudly a view that turned out to be far more seditious to the social order than, say, the many campaigns by various New York attorneys general against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they would have vanished long ago. This woman wasn't saying that Wall Street bankers were corrupt. She was saying that they were stupid. These people whose job it was to allocate capital apparently didn't even know how to manage their own.

However, the typical representation of an investor is someone who mostly looks at prices when planning his or her actions; price-only investors tend to underperform value investors. Effective investors, on the other hand, think like businesspeople, allocating capital within the firm to projects with high expected returns. Allocators—individuals making calculated capital allocations to projects or firms—play a vital role in growing the economy for us all by directing resources to the most effective value-creating organizations. We would all be better off if more investors thought like allocators.

The shareholders who financed the risk taking had no real understanding of what the risk takers were doing, and, as the risk taking grew ever more complex, their understanding diminished. All that was clear was that the profits to be had from smart people making complicated bets overwhelmed anything that could be had from servicing customers, or allocating capital to productive enterprise.

Perhaps the most widely read piece of research that McKinsey has published in the past decade showed that companies that rapidly re-allocate capital to new growth businesses outperform those that take a steady-state approach.21 Yet, the social side of strategy is such that companies still tend to take what is known as a “peanut butter” approach—spreading a thin layer of resources smoothly across the whole enterprise, even though it’s clear that opportunities are far greater in some areas than in others.

It means this War was never political at all, the politics was all theatre, all just to keep the people distracted … secretly, it was being dictated instead by the needs of technology … by a conspiracy between human beings and techniques, by something that needed the energy-burst of war, crying, “Money be damned, the very life of [insert name of Nation] is at stake,” but meaning, most likely, dawn is nearly here, I need my night’s blood, my funding, funding, ahh more, more … The real crises were crises of allocation and priority, not among firms – it was only staged to look that way – but among the different Technologies, Plastics, Electronics, Aircraft, and their needs which are understood only by the ruling elite …

It must be understood that a society’s dominant mode of material production, i.e., the “hegemonic” method of organizing the relations of material production (such as manufacturing and food production), conditions the overall character of the society more than any other of its features does. This is because the society is erected on the basis of material production; the first task for a society is to reproduce itself in its specific form, which presupposes the reproduction of a set of production relations. Social relations will tend to evolve that make possible the reproducing of the relations of production. In the spheres of economic distribution, of politics, of sexual relations, of intellectual production, and so on, social structures and ideologies will tend to predominate that are beneficial, “functionally selected” with respect to the dominant mode of production.5 Therefore, a movement that aims for fundamental transformations in society should not limit itself to the sphere of distribution, as do consumer co-ops, credit unions, and housing co-ops, nor the sphere of gender relations, as does the feminist movement, but should concentrate on changing the mode of production (with its correlative property relations), as does worker cooperativism. Such cooperativism on a societal scale, involving “a federation of free communities which shall be bound to one another by their common economic and social interests and shall arrange their affairs by mutual agreement and free contract,”6 is not only a more socially rational way of organizing production than capitalism but also a more intrinsically ethical way (even apart from its potential allocative efficiencies).

Much of the story we have told falls outside the boundaries of modern academic disciplines and their respective histories. Contemporary economics focuses on issues of efficiency in allocation, political science on institutions of governmental power, political theory on questions of justice, sociology on social groups as defined by interactions outside the market. Some division of intellectual labor is of course productive, and the conceptual lenses that each discipline brings to bear may genuinely help us see an aspect of reality that would otherwise remain undetected. Yet those concerned with the moral implications and ramifications of the market--as any self-critical person in modern society ought to be--get a very skewed picture when they view it through only one of these lenses. Seeing the market with the added perspectives offered by the thinkers treated here provides us with a richer and more rounded view.

More specifically, this book will try to establish the following points. First, there are not two great liberal social and political systems but three. One is democracy—political liberalism—by which we decide who is entitled to use force; another is capitalism—economic liberalism—by which we decide how to allocate resources. The third is liberal science, by which we decide who is right. Second, the third system has been astoundingly successful, not merely as a producer of technology but also, far more important, as a peacemaker and builder of social bridges. Its great advantages as a social system for raising and settling differences of opinion are inherent, not incidental. However, its disadvantages—it causes pain and suffering, it creates legions of losers and outsiders, it is disorienting and unsettling, it allows and even thrives on prejudice and bias—are also inherent. And today it is once again under attack. Third, the attackers seek to undermine the two social rules which make liberal science possible. (I’ll outline them in the next chapter and elaborate them in the rest of the book.) For the system to function, people must try to follow those rules even if they would prefer not to. Unfortunately, many people are forgetting them, ignoring them, or carving out exemptions. That trend must be fought, because, fourth, the alternatives to liberal science lead straight to authoritarianism. And intellectual authoritarianism, although once the province of the religious and the political right in America, is now flourishing among the secular and the political left. Fifth, behind the new authoritarian push are three idealistic impulses: Fundamentalists want to protect the truth. Egalitarians want to help the oppressed and let in the excluded. Humanitarians want to stop verbal violence and the pain it causes. The three impulses are now working in concert. Sixth, fundamentalism, properly understood, is not about religion. It is about the inability to seriously entertain the possibility that one might be wrong. In individuals such fundamentalism is natural and, within reason, desirable. But when it becomes the foundation for an intellectual system, it is inherently a threat to freedom of thought. Seventh, there is no way to advance knowledge peacefully and productively by adhering to the principles advocated by egalitarians and humanitarians. Their principles are poisonous to liberal science and ultimately to peace and freedom. Eighth, no social principle in the world is more foolish and dangerous than the rapidly rising notion that hurtful words and ideas are a form of violence or torture (e.g., “harassment”) and that their perpetrators should be treated accordingly. That notion leads to the criminalization of criticism and the empowerment of authorities to regulate it. The new sensitivity is the old authoritarianism in disguise, and it is just as noxious.

First, as I showed in Chapter 5, the term “cultural Marxism” refers to a particular Marxist theory and strategy inaugurated by Antonio Gramsci – working to establish “cultural hegemony” in order to effect socialist revolution. Second, the substitution of special identity groups advocated for by social justice activists for the working class championed by Marxists does not lead to an identical or nearly identical politics. With the working class as a lever, Marxism proposes to overcome its nemesis – the capitalist class, which maintains the class system, including a class-based system of production and resource allocation. Social justice, on the other hand, aims at little more than debunking particular identity groups from atop a putative social hierarchy, knocking them from their supposed positions of totemic privilege, and replacing them with members of supposedly subordinated groups. Third, in Chapter 5, I told why Marxism and postmodernism can’t be equated. I’ll restate it here. While postmodern theory is anti-capitalist, it not only rejects capitalism but also other “totalizing” systems, or “meta-narratives,” including even the major system proposed to counter capitalism – Marxism itself.

This bio-power was without question an indispensable element in the development of capitalism; the latter would not have been possible without the controlled insertion of bodies into the machinery of production and the adjustment of the phenomena of population to economic processes. But this was not all it required; it also needed the growth of both these factors, their reinforcement as well as their availability and docility; it had to have methods of power capable of optimizing forces, aptitudes, and life in general without at the same time making them more difficult to govern. If the development of the great instruments of the state, as institutions of power, ensured the maintenance of production relations, the rudiments of anatomo- and bio-politics, created in the eighteenth century as techniques of power present at every level of the social body and utilized by very diverse institutions (the family and the army, schools and the police, individual medicine and the administration of collective bodies), operated in the sphere of economic processes, their development, and the forces working to sustain them. They also acted as factors of segregation and social hierarchization, exerting their influence on the respective forces of both these movements, guaranteeing relations of domination and effects of hegemony. The adjustment of the accumulation of men to that of capital, the joining of the growth of human groups to the expansion of productive forces and the differential allocation of profit, were made possible in part by the exercise of bio-power in its many forms and modes of application. The investment of the body, its valorization, and the distributive management of its forces were at the time indispensable.

Collateral Capacity or Net Worth? If young Bill Gates had knocked on your door asking you to invest $10,000 in his new company, Microsoft, could you get your hands on the money? Collateral capacity is access to capital. Your net worth is irrelevant if you can’t access any of the money. Collateral capacity is my favorite wealth concept. It’s almost like having a Golden Goose! Collateral can help a borrower secure loans. It gives the lender the assurance that if the borrower defaults on the loan, the lender can repossess the collateral. For example, car loans are secured by cars, and mortgages are secured by homes. Your collateral capacity helps you to avoid or minimize unnecessary wealth transfers where possible, and accumulate an increasing pool of capital providing accessibility, control and uninterrupted compounding. It is the amount of money that you can access through collateralizing a loan against your money, allowing your money to continue earning interest and working for you. It’s very important to understand that accessibility, control and uninterrupted compounding are the key components of collateral capacity. It’s one thing to look good on paper, but when times get tough, assets that you can’t touch or can’t convert easily to cash, will do you little good. Three things affect your collateral capacity: ① The first is contributions into savings and investment accounts that you can access. It would be wise to keep feeding your Golden Goose. Often the lure of higher return potential also brings with it lack of liquidity. Make sure you maintain a good balance between long-term accounts and accounts that provide immediate liquidity and access. ② Second is the growth on the money from interest earned on the money you have in your account. Some assets earn compound interest and grow every year. Others either appreciate or depreciate. Some accounts could be worth a great deal but you have to sell or close them to access the money. That would be like killing your Golden Goose. Having access to money to make it through downtimes is an important factor in sustaining long-term growth. ③ Third is the reduction of any liens you may have against these accounts. As you pay off liens against your collateral positions, your collateral capacity will increase allowing you to access more capital in the future. The goose never quit laying golden eggs – uninterrupted compounding. Years ago, shortly after starting my first business, I laughed at a banker that told me I needed at least $25,000 in my business account in order to borrow $10,000. My business owner friends thought that was ridiculously funny too. We didn’t understand collateral capacity and quite a few other things about money.

These negative-sum games of coercion and extortion lead to highly inefficient outcomes, and they can only be avoided by carefully crafting the ex ante rules to avoid such coercion and extortion. These coercive threats that make negative-sum games possible, and that decrease the payoffs of positive-sum games, cannot be neatly distinguished in practice from innocent externalities: any act or omission of one party that harms another, i.e. any externality, doubles as a threat, whether a tiny threat or a large threat, from which an extortion premium, its size depending on the size of the threat, can be extracted. In order to try to distinguish coercion, and the extortion it gives rise to, from an "innocent" externality that can be cured by efficient bargaining, there are ways to exclude some of these extreme possibilities from the prior allocation of rights. And indeed criminal and tort law do this: they distinguish purposeful behavior from negligent, and negligent from the mere unfortunate accident. But any such ex ante distiction contradicts the claim that the Coase Theorem applies to any prior allocation of rights. Voluntary bargaining cannnot give rise to tort and criminal law. Quite the opposite is true: at least a basic tort law is necessary to make voluntary bargaining possible. Tort law (and the associated property law which defines boundaries for the tort of trespass) is logically prior to contract law: good contracts depend on good tort and property law. Without a good tort law already in place, nobody, including the "protection firms" posited by anarcho-capitalism, can engage in the voluntary bargains that are necessary for efficient outcomes. This is not to claim that the polar opposite of anarcho-capitalism must be true, i.e. that "the government" along the lines we are familiar with is necessary. Instead, a system of political property rights that is unbundled and decentralized is possible, and may give rise to many of the benefits (e.g. peaceful competition between jurisdictions) promised by anarcho-capitalism. But political property rights are not based on a Rothbardian assumption of voluntary agreement -- instead, in these systems the procedural law of political property rights, as well as much of substantive property rights and tort law, is prior to contract law, and their origin necessarily involves some degree of coercion. Political and legal systems have not, do not, and cannot originate solely from voluntary contract. Both traditional "social contract" justifications of the state and the Rothbardian idea that contracts can substitute for the state are false: in all cases coercion is involved, both at the origin and in the ongoing practice of legal procedure. In both cases the term "contract" is used, implying voluntary agreement, when the term "treaty", a kind of agreement often forced by coercion, would far more accurately describe the reality. The real task for libertarians and other defenders of sound economics and law is not to try to devise law from purely voluntary origins, an impossible task, but to make sure the ex ante laws make voluntary bargaining possible and discourage coercion and extortion (by any party, including political property rights holders or governments) as much as possible.

Some of the key pillars of Nasser's project proved greatly lacking. The public sector evolved into a Soviet-style system of sterile thinking, a deathbed for talent, a site of mediocre resource allocation, inefficiency, suffocating bureaucracy, waste and decrepit management; in no way could it support lasting economic development in the country. Many of Nasser's detractors argue that land reform precipitated a dramatic retreat of Egyptian agribusiness: that the replacement of sophisticated, well-capitalized large landowners by low-skilled and poor peasants resulted in lower quality products, no concern for the long-term subsistence of the land, poor marketing of strategic Egyptian crops such as cotton and a continued erosion of links to

It seems unwise to allocate a large portion of investable capital to any one deep value opportunity, even if the latter promises a large expected return.

In the United States, most boards are benign, and the power resides primarily with the chief executive; boards tend to only become significant when it comes time to replace a failing CEO. The AB Inbev board, however, is the primary power center in the company. It exemplifies that boards can play a central role in setting BHAGs, developing strategy, sustaining culture, seizing opportunities and leading through tumultuous times. Without such a strong and unified board, AB Inbev would not have come through the 2008-09 challenges as strong as it did (and perhaps even not at all). The AB Inbev board pays constant attention to its own culture, disciplines and vibrancy, with as much fanatic attention as building and preserving the management culture of the company. Most important, it makes decisions and allocates capital for long-term shareholder value, measured in multiple decades, not in terms of quarterly moments. If more boards behaved this way, we would have better performing enterprises and lasting companies.

will be a test of the political system to see if it can get the high-tech sector to pay what other firms do, and help address the nation’s deficit problems that are the purportedly the overriding concern of so many politicians. A problem for Apple and its fellow Internet giants is that the profits they allocate to foreign locales cannot be repatriated to the United States without paying U.S. taxes. To get around this, the digital giants are launching a lobbying campaign to establish a “repatriation holiday.” The last such corporate tax repatriation was in 2004. This would allow for a brief amnesty period during which American businesses could return these foreign profits to the United States without owing any taxes on them.

learning—we have learned how to increase productivity, the outputs that can be produced with any inputs. There are two aspects of learning that we can distinguish: an improvement in best practices, reflected in increases in productivity of firms that marshal all available knowledge and technology, and improvements in the productivity of firms as they catch up to best practices. In fact, the distinction may be somewhat artificial; there may be no firm that has employed best practices in every aspect of its activities. One firm may be catching up with another in some dimension, but the second firm may be catching up with the first in others. In developing countries, almost all firms may be catching up with global best practices; but the real difference between developing and developed countries is the larger fraction of firms that are significantly below global best practices and the larger gap between their productivity and that of the best-performing firms. While we are concerned in this book with both aspects of learning, it is especially the learning associated with catching up that we believe has been given short shrift in the economics literature, and which is central to improvements in standards of living, especially in developing countries. But as we noted in chapter 1, the two are closely related; because of the improvements in best practices by the most innovative firms, most other firms are always engaged in a process of catching up. While the evidence of Solow and the work that followed demonstrated (what to many seems obvious) the importance of learning for increases in standards of living, to further explicate the role of learning, the first three sections of this chapter marshal other macro- and microeconomic evidence. In particular, we stress the pervasive gap between best practices and the productivity of most firms. We argue that this gap is far more important than the traditional allocative inefficiencies upon which most of economics has focused and is related to learning—or more accurately, the lack of learning. The final section provides a theoretical context within which to think about the sources of sustained increases in standards of living, employing the familiar distinction of movements of the production possibilities curve and movements toward the production possibilities curve. Using this framework, we explain why it is that we ascribe such importance to learning. Macroeconomic Perspectives There are several empirical arguments that can be brought to bear to support our conclusion concerning the importance of learning. The first is a simple argument: In theory, leading-edge technology is globally available. Thus, with sufficient capital and trained labor (or sufficient mobility for capital and trained labor), all countries should enjoy comparable standards of living. The only difference would be the rents associated with ownership of intellectual property rights and factor supplies. Yet there is an enormous divergence in economic performance and standards of living across national economies, far greater than can be explained by differences in factor supplies.1 And this includes many low-performing economies with high levels of capital intensity (especially among formerly socialist economies) and highly trained labor forces. Table 2.1 presents a comparison of formerly socialist countries with similar nonsocialist economies in the immediate aftermath of the collapse of the state-controlled model of economic activity. TABLE 2.1 Quality of Life Comparisons, 1992–1994 (U.S. $) Source: Greenwald and Khan (2009), p. 30. In most of these cases, at the time communism was imposed after World War II, the subsequently socialist economies enjoyed higher levels of economic development than

The land market shapes the allocation of capital to land and thereby shapes the geographical structure of production, exchange and consumption, the technical division of labour in space, the socioeconomic spaces of reproduction, and so forth.

Justice Harold R. Medina stated in 1954 that 'it would be difficult to exaggerate the importance of investment banking to the national econ- omy.'2 This remark remains true today. Investment banks lie at the heart of the capital allocation

This is why it is so fundamental for us right now to grab hold of this idea of power and to democratize it. One of the things that is so profoundly exciting and challenging about this moment is that as a result of this power illiteracy that is so pervasive, there is a concentration of knowledge, of understanding, of clout. I mean, think about it: How does a friendship become a subsidy? Seamlessly, when a senior government official decides to leave government and become a lobbyist for a private interest and convert his or her relationships into capital for their new masters. How does a bias become a policy? Insidiously, just the way that stop-and-frisk, for instance, became over time a bureaucratic numbers game. How does a slogan become a movement? Virally, in the way that the Tea Party, for instance, was able to take the "Don't Tread on Me" flag from the American Revolution, or how, on the other side, a band of activists could take a magazine headline, "Occupy Wall Street," and turn that into a global meme and movement. The thing is, though, most people aren't looking for and don't want to see these realities. So much of this ignorance, this civic illiteracy, is willful. There are some millennials, for instance, who think the whole business is just sordid. They don't want to have anything to do with politics. They'd rather just opt out and engage in volunteerism. There are some techies out there who believe that the cure-all for any power imbalance or power abuse is simply more data, more transparency. There are some on the left who think power resides only with corporations, and some on the right who think power resides only with government, each side blinded by their selective outrage. There are the naive who believe that good things just happen and the cynical who believe that bad things just happen, the fortunate and unfortunate unlike who think that their lot is simply what they deserve rather than the eminently alterable result of a prior arrangement, an inherited allocation, of power.

Successful people know that hours, like capital, can be consciously allocated with the goal of creating riches—in the form of a changed world, a life’s work—over time. Indeed, successful people understand that work hours must be more carefully stewarded than capital because time is absolutely limited. You can earn more money, but the mightiest among us is granted no more than 168 hours per week, and it is physically impossible to work for all of them.

Passage Five: From Business Manager to Group Manager This is another leadership passage that at first glance doesn’t seem overly arduous. The assumption is that if you can run one business successfully, you can do the same with two or more businesses. The flaw in this reasoning begins with what is valued at each leadership level. A business manager values the success of his own business. A group manager values the success of other people’s businesses. This is a critical distinction because some people only derive satisfaction when they’re the ones receiving the lion’s share of the credit. As you might imagine, a group manager who doesn’t value the success of others will fail to inspire and support the performance of the business managers who report to him. Or his actions might be dictated by his frustration; he’s convinced he could operate the various businesses better than any of his managers and wishes he could be doing so. In either instance, the leadership pipeline becomes clogged with business managers who aren’t operating at peak capacity because they’re not being properly supported or their authority is being usurped. This level also requires a critical shift in four skill sets. First, group managers must become proficient at evaluating strategy for capital allocation and deployment purposes. This is a sophisticated business skill that involves learning to ask the right questions, analyze the right data, and apply the right corporate perspective to understand which strategy has the greatest probability of success and therefore should be funded. The second skill cluster involves development of business managers. As part of this development, group managers need to know which of the function managers are ready to become business managers. Coaching new business managers is also an important role for this level. The third skill set has to do with portfolio strategy. This is quite different from business strategy and demands a perceptual shift. This is the first time managers have to ask these questions: Do I have the right collection of businesses? What businesses should be added, subtracted, or changed to position us properly and ensure current and future earnings? Fourth, group managers must become astute about assessing whether they have the right core capabilities. This means avoiding wishful thinking and instead taking a hard, objective look at their range of resources and making a judgment based on analysis and experience. Leadership becomes more holistic at this level. People may master the required skills, but they won’t perform at full leadership capacity if they don’t begin to see themselves as broad-gauged executives. By broad-gauged, we mean that managers need to factor in the complexities of running multiple businesses, thinking in terms of community, industry, government,

In this post I am going to take a look at what an investor can do to improve a hedge fund investment through the use of dynamic capital allocation. For the purposes of illustration I am going to use Cantab Capital’s Aristarchus program – a quantitative fund which has grown to over $3.5Bn in assets under management since its opening with $30M in 2007 by co-founders Dr. Ewan Kirk and Erich Schlaikjer.

The category of small-cap value represents approximately 3 percent of the capitalization of the broad U.S. market.

The 2012 Ibbotson® Stocks, Bonds, Bills, and Inflation® Classic Yearbook, published by Morningstar, Inc., is one of the best sources of up-to-date information regarding the performance of various U.S. capital market investment alternatives. The data cover the period from 1926 to the present.

But the current investment banking model—whether applied in a standalone institution such as Goldman or in a broad financial conglomerate such as Deutsche Bank—is at the heart of the problems the finance sector poses for the real economy. Investment banks today engage in securities issuance, corporate advice and asset management; they make markets in equities and FICC, and trade in these markets on their own account. It is only necessary to list these functions to see that each of these activities conflicts with all the others. Each should be undertaken in distinct institutions. And with lower volumes of inter-bank trading, a diminished role for public equity markets and much more direct investment by asset managers the scale of most of these activities should be much reduced. Among all the actors in the finance sector today, only the asset manager, who typically earns a fee calculated as a percentage of funds under management, is rewarded for idleness. The profits of a segregated deposit-taking bank would similarly depend primarily on the scale of the deposit base, and secondarily on its success in making good loans. Dedicated channels of capital allocation have a more appropriate incentive structure than activities focused on trading and transactions. Whenever

it appears the company has a strong competitive position with a favorable long-term outlook, you would next run several dividend discount models that include different growth rates of the company’s owner earnings over different time periods to get a sense of approximate valuation. Then you would study and understand management’s long-term capital allocation strategy. Last, you might call a few friends, colleagues, or financial advisers to see if they have an opinion about your company or, better yet, your company’s competitors. Take note: None of this requires a high IQ, but it is more laborious and requires more mental effort and concentration than simply figuring out the company’s current price-to-earnings ratio.

In basic microeconomics textbooks, even when welfare gets attention, it is in the domain of efficient outcomes. Redistribution through taxes is first introduced as a big ‘no go’ domain with concepts of deadweight loss. However, inefficiency out of market behaviour and market outcomes is plainly ignored and overlooked. Approximately, $600 million daily is needed to feed every extremely poor person, yet about $2.75 billion value of food is wasted every day, according to Food and Agriculture Organization. Consequently, 9 million people die every year from hunger while one-third of all food is wasted. This gross inefficiency in economic resources is not captured or discussed. According to Food and Agriculture Organization of the United Nations, globally, per capita food supply increased from about 2,200 kcal per day in the early 1960s to more than 2,903 kcal per day by 2014. But under capitalism, the market allocates goods including even food to only those who can pay its price. It does not make a difference whether the willingness to pay is less than the price due to ‘preference’ or due to ‘poverty’. Yet, mainstream economics claims consumer sovereignty.

As active managers see allocators moving capital to passive investing, they have little choice but to try and stem the flow by trying to demonstrate outperformance immediately. Short-term thinking and decision-making inevitably lead to poor performance. In the market environment of 2019, short-term decision-making translates into buying high-growth stocks, because they have momentum. Popular growth stocks are bought regardless of valuation and the core tenets of cash flow analysis and contrarianism are cast aside. Ultimately this will cause negative performance for those active managers unable to abstain from following the herd and chasing a momentum-driven market to try and keep their investor base.

The global financial crisis was caused by excesses of the liberal system of regulations and the belief that a completely free market will allow enormous innovation and allocate capital to the most profitable enterprises with the highest returns. Once the Federal Reserve Chairman decided it was not necessary to regulate derivatives and supervise them, the fuse was lit. Once you find that you can mash up a lot of good and bad assets in one bundle and pass on your risk all around Europe and other parts of the world, you have started something like a Ponzi scheme which must come to an end sometime…The business of a person in a financial institution is to make the biggest profit for himself, so just condemning the bankers and the profit takers does not make sense. You have allowed these rules, and they work within these rules.

Optimism. One of the most important qualities of a good leader is optimism, a pragmatic enthusiasm for what can be achieved. Even in the face of difficult choices and less than ideal outcomes, an optimistic leader does not yield to pessimism. Simply put, people are not motivated or energized by pessimists. Courage. The foundation of risk-taking is courage, and in ever-changing, disrupted businesses, risk-taking is essential, innovation is vital, and true innovation occurs only when people have courage. This is true of acquisitions, investments, and capital allocations, and it particularly applies to creative decisions. Fear of failure destroys creativity. Focus. Allocating time, energy, and resources to the strategies, problems, and projects that are of highest importance and value is extremely important, and it’s imperative to communicate your priorities clearly and often. Decisiveness. All decisions, no matter how difficult, can and should be made in a timely way. Leaders must encourage a diversity of opinion balanced with the need to make and implement decisions. Chronic indecision is not only inefficient and counterproductive, but it is deeply corrosive to morale. Curiosity. A deep and abiding curiosity enables the discovery of new people, places, and ideas, as well as an awareness and an understanding of the marketplace and its changing dynamics. The path to innovation begins with curiosity. Fairness. Strong leadership embodies the fair and decent treatment of people. Empathy is essential, as is accessibility.

In 2017, US companies are estimated to have allocated more than $650 million to fuel the AI talent race, with more than 10,000 available positions at top employers across the country. The top five tech companies have the capital to crowd out competitors: startups, universities, municipalities, established corporations in other industries, and less wealthy countries.31 In Britain, university administrators are already talking about a “missing generation” of data scientists.

The particular Soviet state form of capitalism was more or less replicated in other “socialist” countries. In them, state officials centrally appropriated the surpluses produced by industrial workers as per the classic definition of capitalist exploitation. Moreover, state administrative (command) allocation replaced markets, and state ownership replaced private ownership of industries’ means of production (other than labor power)

the creation of economic value is a collective process. Businesses do not create wealth on their own. No business today can operate without the fundamental services provided by the state: schools and higher education institutions, health and social care services, housing provision, social security, policing and defence, the core infrastructures of transport, energy, water and waste systems. These services, the level of resources allocated to them and the type of investments made in them, are crucial to the productivity of private enterprises. The private sector does not ‘create wealth’ while taxpayer-funded public services ‘consume’ it. The state does not simply ‘regulate’ private economic activity. Rather, economic output is co-produced by the interaction of public and private actors—and both are shaped by, and in turn help to shape, wider social and environmental conditions.

He also wants to see managers who set and meet realistic goals; build their businesses from within rather than through acquisition; allocate capital wisely; and do not pay themselves hundred-million-dollar jackpots of stock options.

Optimism. One of the most important qualities of a good leader is optimism, a pragmatic enthusiasm for what can be achieved. Even in the face of difficult choices and less than ideal outcomes, an optimistic leader does not yield to pessimism. Simply put, people are not motivated or energized by pessimists. Courage. The foundation of risk-taking is courage, and in ever-changing, disrupted businesses, risk-taking is essential, innovation is vital, and true innovation occurs only when people have courage. This is true of acquisitions, investments, and capital allocations, and it particularly applies to creative decisions. Fear of failure destroys creativity. Focus. Allocating time, energy, and resources to the strategies, problems, and projects that are of highest importance and value is extremely important, and it’s imperative to communicate your priorities clearly and often. Decisiveness. All decisions, no matter how difficult, can and should be made in a timely way. Leaders must encourage a diversity of opinion balanced with the need to make and implement decisions. Chronic indecision is not only inefficient and counterproductive, but it is deeply corrosive to morale. Curiosity. A deep and abiding curiosity enables the discovery of new people, places, and ideas, as well as an awareness and an understanding of the marketplace and its changing dynamics. The path to innovation begins with curiosity. Fairness. Strong leadership embodies the fair and decent treatment of people. Empathy is essential, as is accessibility. People committing honest mistakes deserve second chances, and judging people too harshly generates fear and anxiety, which discourage communication and innovation. Nothing is worse to an organization than a culture of fear. Thoughtfulness. Thoughtfulness is one of the most underrated elements of good leadership. It is the process of gaining knowledge, so an opinion rendered or decision made is more credible and more likely to be correct. It’s simply about taking the time to develop informed opinions. Authenticity. Be genuine. Be honest. Don’t fake anything. Truth and authenticity breed respect and trust. The Relentless Pursuit of Perfection. This doesn’t mean perfectionism at all costs, but it does mean a refusal to accept mediocrity or make excuses for something being “good enough.” If you believe that something can be made better, put in the effort to do it. If you’re in the business of making things, be in the business of making things great. Integrity. Nothing is more important than the quality and integrity of an organization’s people and its product. A company’s success depends on setting high ethical standards for all things, big and small. Another way of saying this is: The way you do anything is the way you do everything.

Capital markets provide three tools for investors to employ in generating investment returns: asset allocation, market timing, and security selection.

A second method of rebalancing involves the creation of expansion bands. With this method of rebalancing, you create a window, such as plus or minus 5 percent from your desired allocation. You would rebalance whenever the asset class exceeds those bands. For example, if our desired equity allocation was 60 percent, we’d only need to rebalance whenever the equities in our portfolio fell below 55 percent or rose above 65 percent. However, if you plan to use the expansion band method and intend to rebalance as soon as your allocation touches either band, this would require more frequent monitoring of one’s portfolio than the predetermined time-interval method, especially in a volatile market. In addition, if strict expansion band rebalancing were to be done in a taxable account, it could create short-term capital gains which are taxed at a higher rate than long-term capital gains. Therefore, you may want to consider delaying your rebalancing until you have held the asset for more than 12 months.

At 50, people are still looking for a stockbroker to work a miracle for them, but at 60 they start looking for an advisor to help them negotiate a truce with reality. Regardless of when people are actually planning to retire, 60 is psychologically the beginning of the end of the accumulation period in their lives, and the beginning of the beginning of the distribution phase.... Variable annuitization offers genuine hope to people who (a) need to live on more than six percent of their capital, (b) need their income to grow in some relation to equity returns, which have historically been more than three times the inflation rate, and (c) at the very, very least, need to be assured that some income will continue for their entire lives. Variable annuitization is the only chance these people have. ...If Americans understood how the capital markets actually work, most folks would choose variable universal life insurance over variable life and whole life as the cheapest form of permanent insurance they could buy for the long run. That's simply because the insurance cost of an insurance policy is a pure function of how much of its own money the insurance company has exposed. Since the policyholder's own cash value builds up most significantly over time - and therefore the insurance company's exposure falls further, faster - in variable universal policies than in other debt-based (or general account-based) contracts, the net premium dollars allocated to the purchase of the death benefit must be lower, at the end of the day. And the policyholder's equity must be commensurately greater.

In economy, cash is king. But it will be a great king if it is in the hands of people who can change the world.

Capitalism allocates resources, generates innovation, rewards effort, and builds affluence with high efficiency, and these are extraordinarily important things to do well in a society. As a system capitalism is not perfect, but it’s far better than the alternatives. Winston Churchill said that, “Democracy is the worst form of government except for all those others that have been tried.”2 We believe the same about capitalism. The