The Coin, or why I decided to write this blog

I was head first trying to reach under the seat of our car when I heard my son say: “Don’t worry, daddy, it’s just a coin”. He just couldn’t understand why I was making such a fuss over something that was really boring as a toy and that he was seeing so much of it at so many different places. As far as toys go, a coin definitely doesn’t come with a lot of bragging rights!

I found this comment surprisingly irritating on many levels. I felt the usual “we work really hard to earn that money”. I was also concerned about impressing on him the value of money, starting with the small coins all the way to the amounts that grown-ups need to pay the bills. I was also baffled by how his perception of this coin had changed since this morning.

It was one of those school fairs where the children come with a couple of coins in their pockets and have the opportunity to spend them in ways that grown-ups find acceptable. Books, jigsaws, craft sets, that kind of thing. The children are by and large too young for pocket money so the coins are given to them on a “use it or lose it” basis, i.e. any coin that is not spent on the fair tends to go back to the parents. In our case, there is a little piggy bank that those coins go into.

When our son came back from school, he still had three of the five coins left. He explained what he had spent the two coins on and that he did not want to waste the other ones on things he did not need. I seem to remember that he elaborated why he decided against certain purchases but that may be my brain playing tricks on me. What stuck is that he had clearly given his spending at the fair some thought. This mature statement lulled me into that fuzzy (yet completely misguided) feeling that his financial education was well on track (it isn’t). It also set me up for the surprise conversation in the back of our car on a hot early summer’s day. Clearly, a coin at the fair was a different animal from a coin at home competing with a number of other toys.

As it always is, I did not have a good rebuttal at that moment. However, I did feel that I could not leave the situation there. I have been wondering how I could explain to my son that a coin is a store of value, that people worked hard for money, that many people do not have enough coins and that - if nothing else - we need to treat money with care. At the same time, money is not the be-all and end-all that some people make it out to be. It is a means to an end and not the end itself.

I have spent most of my career helping people and institutions with their investment decisions as well as managing their money. All of this is very rational and very structured. Most importantly, everything has an audit trail where every decision is taken at a fixed time and place with clear indicators of why it was taken. (At least that is what they tell their clients and regulators.)

That is not how individuals, not only children, go about their affairs. Most people who find themselves in the fortunate position to have built up a liquidity position get little help with investing (or not investing!) their money. There are plenty of financial advisors, investment managers, etc. who are happy to help for a hefty fee without taking any of the risks. I do not want to be too provocative when I say that a large number of these are at best a very small step ahead of their clients. Thinking about investments, let alone the emotions, biases and other elements is rarely done. Decisions are often based on cliches (Tech always goes up! Safe as houses!) and lazy shortcuts.

This is why I have decided to write this blog, actually more of a collection of vignettes. I would like to explore money and investing. There is no particular order to the postings, just thoughts and experiences that I come across in my day-to-day investment experiences that I think are worth sharing. This is not a blog for investment ideas. It is also not a blog to teach the reader about financial analysis and valuation with formulas and calculations. In fact, I will do my very best to avoid formulas and calculations and focus on concepts.

Where does that leave my son and his understanding of money? He is probably still too young to care about investing. But when the time comes, I hope he will find this blog useful in making thoughtful decisions. Likewise, I hope that the write-ups are useful and interesting to anyone early in their investment journey to veterans who can look back at many years in the market. I will try to keep the blog as simple and qualitative as possible. One of my finance professors always challenged his students with “How would you explain this to your grandmother?”. I will aim to live up to the challenge.

Alex Hirsch

July 2022