If you stop working, don’t you think you’ll lose the thing that gave your life shape? Don’t you worry that your mind will go soft? Doesn’t a job give you purpose?

And it’s this thought that I want to talk about a little today, because whilst I believe there is some truth in it, its not as simple as the argument makes it sound.

I’m acutely aware I’m starting heavy here, but bear with me…after surviving the concentration camps, Viktor Frankl spent the rest of his career trying to understand why some people held together in conditions that broke almost everyone. In his seminal piece “Man’s Search For Meaning” he returns often to a line he borrowed from Nietzsche:

I appreciate he was not talking about jobs here, but I can’t escape the feeling that he’d have found it frankly absurd that today we feel purpose has to arrive with an employers logo stamped on it.

Let’s be clear. I am not arguing that a job is worthless and that people who work jobs full time and never wish to retire are deluded, it’s more complex than that. A job can present a number of benefits beyond money, it can hand you genuine friendships, challenge, structure and for some, a reason to get up in the morning - and that matters enormously. My point however is more narrow, it’s that we have somehow bundled these genuinely good things together and labelled it purpose. And because the place we get these from most regularly is a job, job = purpose.

Reinforcing this belief is the fact that losing work can genuinely hurt. I spent a period unemployed previously and I remember its flavour. Days blurring, social withdrawal, creeping anxiety about your worth. I’m not here to pretend that doesn’t exist, but these issues are compounded by something else. A dwindling (or worse) supply of money. When you consider our brains two major functions are to simplify things and to protect us from negative effects, it’s no surprise we connect in our memory the lack of job to the problems directly and seek to avoid it - whilst teaching others to avoid it too.

But, and here’s where I push back about early retirement and purpose. As an investor, one that’s already done the sums, that second layer compounding effect of money issues, should be solved. You’re no longer choosing between structure and survival, you’re choosing between structure and freedom.

That's an entirely different decision and should be made from a different emotional place. Which made me wonder how complicated purpose actually has to be and then, just a few days later, I got my answer on a bench in the sunshine

Puppets

On Thursday I took Livvy to the seaside. One of the best things about living near the East coast is there’s no shortage of seaside towns to visit, each with their own charm, nice beaches and abundance of ice cream. Whilst walking along the front we were flagged down by an older lady sat knitting on a bench, she had a bag full of little knitted animal hand puppets. She asked Livvy if she wanted one - of course she said YES! - And giddily picked a little mouse from the bag, placed it on her hand and it stayed there almost all day - I quite literally had to prise it from her when sticking her in the bath.

I thanked her and asked her how much they were. “Free” she replied, that her husband had passed a couple of years ago and knitting helps her keep busy and active, but most importantly seeing how happy it makes small children gives her purpose. I slipped her some money for the wool, she wouldn’t take it for the puppet, but I asked her to take the money so she could continue to make puppets for the next child that wanders past.

On the drive home I thought a lot about that interaction. There was no employer or salary, just wool, some knitting needles and a bench in the sunshine. A decision made to keep hands and mind occupied in order to make someone else’s day better. If drawing purpose from situations is so simple, how much of the confusion around purpose comes from well intended social pressure telling us to look and act a certain way. So I looked for where this pressure originates, and the answer was older than you might expect.

Why We Got Here

There’s a reasonable, historical case for treating work as a source of purpose and I think it’s wrong to pretend otherwise. For a long stretch of modern history, getting and keeping a job forced people into society and ground down the more antisocial edges of human character. You simply couldn’t afford to be too difficult or erratic because you needed your boss, colleagues and community to tolerate and trust you. In this sense work helped societies shape people into something workable.

The mechanism we relied on to do this has weakened, but not because work has changed much in the 1890s Emile Durkheim wrote about anomie, a word that essentially describes the state that sets in when a community’s well held beliefs start to dissolve. It leaves people without a clear sense of how to behave or what any of it is for. Of course Durkheim was talking about creeping industrialisation, but the description still fits quite neatly today. The mechanism weakened because we spend huge amounts of our time in spaces that we are both nameless and largely traceless and where none of the old social consequences apply, that parts which people filed down to fit into society are creeping back out and in some cases taking over. It’s another reason why I think purpose has become so tangled up with employment. The other shaping mechanisms have faded, work is the last one standing and we’re asking it to do more than it was built for.

Where Else It Actually Lives

Purpose however is not scarce and it shows up everywhere. In team sports and the people you see every week because of them. In the vegetable patch that needs tending whether you’re up for it or not. In books, teaching and coaching, in volunteering and in raising children. Getting fit rather than putting it off. In looking after that partner or parent that once looked after you. None of this comes with a payslip, all of it is sitting there the whole time, underused because work soaks up a lot of the time.

So if you’re retiring early and are worried about losing the purpose that work gave you, the answer is not to white knuckle it. Start slowly, drop a day and see how you feel. Drop another once you’ve started filling that spare day with things you genuinely enjoy doing. Don’t sit on your arse and watch television because that’s the sort of retirement you should be scared of. Take whatever you currently love and dig further into it then you did before. If you love sport, go play more sport. Play with people other than Barry and Dave who you’ve been playing with since a kid. If it’s gardening get out there and do it, don’t just think about it. If it’s cooking or baking, take a course, practice, become genuinely good at it rather than competent. Whatever you choose to do, throw yourself into it and commit.

Purpose was never just in the job, it was in you all along. The job just kept you too busy to notice.

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His account is now so large that the dividends he receives on his investments dwarf his salary, he could quite comfortably stick it all in a Cash ISA or buy bonds and live the rest of his life comfortably - earning more money from the account then he does through work and it’s highly unlikely the principle amount would fall. But he gets up every morning and heads to to a job he doesn’t love - which led to me asking him, casually the other day - “when do you think you’ll have enough?”

His reply: “not yet.”

Now I'll admit that had my brain racing, I nodded and we carried on, but my brain could not understand in what world £1.5 million isn’t enough. If it isn’t enough, what is enough is supposed to look like? Does he actually know what enough looks like? Do you?

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The Party Story

There's an old wives tale about Kurt Vonnegut and Joseph Heller standing at a party thrown by a hedge fund billionaire, in one of those houses big enough to have its own name. Vonnegut turns to Heller and asks how it feels to know that their host probably made more money in the last 24 hours than Heller's novel Catch-22 had earned in its entire history (which by all accounts is 15m copies worth!). Heller thinks about it briefly and shrugs.

It's a good story because Heller had actually done the thing I think my friend hasn't. He's sat down, at some point, and worked out what enough looked like for him and believed it. That second part is the part almost nobody manages, working out the number is hard enough, but trusting it once you've written it down is harder still, especially if you’re the kind of person who likes watching the number grow.

Why "Not Yet" Is The Answer Everyone Gives

I don't think my friend is greedy, and I don't think most people chasing an ever increasing number are either. I think the issue is that in investing it’s counter intuitive to think about the destination before you set off, so you just keep doing the thing that's been working, because it feels comfortable and rewarding - and stopping won’t. The same discipline that builds the large portfolio is precisely the discipline that makes it hard to look at it and say “that'll do”.

There's a number that floats around UK personal finance space like a sort of holy grail, “the ISA millionaire”, a million pounds sheltered from tax (for now), and was probably built on decades of consistency. It's a genuinely impressive feat, and I'd never take that away from anyone who's got there, seriously if you have, congratulations. But it's also worth asking, and being honest about it, do you actually need a million quid or do you need only about four hundred grand and you actually hit that mark three years ago, are you trying to be a millionaire because it sounds better rather than saying: "I stopped because I got what I came for."

The Number I Insist On Having First

This is where I differ from my friend, and maybe from you. I decided my own number a long time ago, before I started, specifically because I didn't trust the version of me that would be sitting on a large portfolio one day to make a clear-headed decision about that number when the time arrived. That version of me would be too close to it, too used to the number climbing and too aware of what another good year could add. So I fixed my trigger in advance, while I was still far enough away from it to think clearly.

As noted before my wealth is largely illiquid - the majority of it I may struggle to ever realise, so I focus only on the liquid side. Which makes my ISA target number £375,000, presuming I am mortgage free by the time I reach it. At that number I would switch to a more defensive 50/50 portfolio to protect the capital. That should give me around £25,000 a year to spend until my pension kicks in, which is enough for my lifestyle. It’s a higher withdrawal rate than normally deemed safe, but the intention is to pretty much drain the account. I have a cash buffer and emergency fund already in place to mitigate bumps in the road.

The Bottom Line

Unlike me, my friend has by any sensible measure, already crossed the finish line, he just forgot to draw one. I don’t think he's wrong to keep investing nor am I arguing he should stop; what I'm arguing is that "not yet" wasn’t an answer, it's a delaying tactic. There's a real difference between choosing to keep going and simply never having decided when to stop. Heller had his answer ready before anyone asked him the question. My friend is still working his out in real time, somewhere north of a million pounds.

I don't think the number is the thing missing. I think the number was never written down in the first place.

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Here’s the background story you didn’t ask for, I went to a rough school, yet I managed to get 10 C’s and a B. You might think “that’s crap” but at my school that was enough to get an award and cash prize (well Love2Shop vouchers) on stage. To illustrate further, my Secondary School was featured on a Channel 4 doc called Classroom Cops. Where they pretty much filmed kids scrapping on the fields and refusing to obey authority, including a police chase through the school grounds. They even filmed the deputy headmaster having to free a kid from a bin. If I hadn’t driven home the point yet, my ex-Geography teacher has just been sentenced for dealing Ketamine. It wasn’t an ideal start.

And it wasn’t just me. You’ve probably already seen it doing the rounds this week if you’re on social media, but if not: Jeremy Clarkson posts some version of the same message every results day, reminding everyone that he did badly at school and college and turned out fine. It’s become a bit of a tradition at this point, and it’s worth exploring.

So here’s the bit school skips entirely. Getting rich, or at least getting yourself comfortable so that future you has dignity in retirement, doesn’t run on being the smartest person in the room. It runs on three things, and you’ve probably already got all three, regardless of what grades you just received. And it all revolves around investing.

Starting Early

People think investing is pointless until you have a decent chunk of cash and it’s an assumption that can cost investors a lot. The amount matters far less than you’d think, starting early beats starting big.

The reason is that investing rewards time more than it rewards skill. Getting money into the market early - even very small amounts - then leaving it there is more powerful than waiting until you feel ready or feel like you have enough to make it worth doing. Plus it’s much better learning with small amounts.

What matters is getting money into the market and letting time do the heavy lifting, because the heavy lifting really is time’s job not yours.

Time

You have more of it right now than you will ever have again. Not because you’re going to work harder now than in your forties, but because money that’s invested early gets multiple decades to grow into, and that difference is bigger than almost anything else you’ll ever do with it.

Starting at eighteen instead of twenty-eight isn't a ten year head start in any simple sense. It is closer to a head start that ends up being worth more than everything you invest in the following decade combined, purely because the early money has so much more time for that back-loaded compounding to work on it.

Patience

This is the one nobody tells you is a skill, but it absolutely is, weirdly it’s got nothing to do with exam results either.

Patience in investing has very little to do with passivity. It is the active, conscious decision to not interfere with something that is working, during the periods when it feels like it is not working, and there’ll be more of them than the brochures suggest.

You don’t need to pick the next big thing. You don’t need to check the value every day. You just need to be the kind of person who can put money in and then genuinely leave it alone, through the boring years and the scary years alike, which turns out to be far rarer than being clever.

What That Actually Looks Like In Numbers

Say you started at 18, put away £100 a month, and kept doing that every month until you were 65. That’s roughly £57,000 of your own money going in over the years, nothing dramatic, well within reach of a normal part time job or an early career salary.

Now assume a 7.5% average annual return, which is a reasonable long run assumption for a globally diversified portfolio of shares. By 65, that pot isn’t worth £57,000. It’s worth just over £465,000. Contribute more - which you should be able to over time and you could make significant improvements to that number.

Waiting until you're 28 to start and that number drops £217,850 - under half, just because you felt like you weren’t ready. Less than half the pot for just a single decade of dithering.

Be Like Ron But Not Entirely

There’s a story that features first in Morgan Housel’s bestselling book, the Psychology of Money about Ronald Read. Ronald was a quiet, unassuming Janitor and Gas Station attendant in Vermont who led a relatively frugal lifestyle. Read drove a second-hand car, chopped his own firewood and repaired rather than replaced most things he owned - including his clothes. He earned a fairly modest blue collar wage, but because of frugality had a high savings rate which he used to steadily purchase shares of companies for decades. When Read died his executors were shocked to discover he had amassed an incredible $8 million in his portfolio. He had no financial training or Ivy League schooling but did understand the power of starting early, time and being patient. Staying true to his character Ronald left his wealth to the local hospice and library.

Now we shouldn’t overdo our praise for Ronald Read, he lived an overly frugal existence and didn’t enjoy his wealth and that to me, seems somewhat silly. There’s a fine line and balance to this and that’s up to you to find, but as explained earlier - it's better to find that along the way, rather than wait to see where your balance is.

The Bottom Line

So if you picked up your results this week and the envelope didn’t say what you hoped, here’s what you should take from this: dignity in later life and retirement is not the thing they were testing you on. It doesn’t care about what grade you got in Geography, or if you can write a perfect essay. It cares about three things - starting early, giving it time, and sitting on your hands. None of those three things showed up on your results slip, all three of them are available to you this week.

Open an account and think about putting something in it. With a bit of luck and a lot of time, 67-year-old you will have 500,000 reasons to thank you.

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Warren confesses that on around 20 occasions he and Charlie have made deals to buy businesses on their very first visit to the site, with none of the theatre, teams of analysts or forensic accounting we’re told due diligence is supposed to look like. In this talk he even admits to buying a steel warehouse within 5 minutes of arriving and hasn’t been back since. He opening quote is the most telling:

And this is the most troubling to me. I have more than once built the kind of spreadsheet that we’re told we should build, projecting a decade of free cash flow into the future, agonising over what the terminal growth should be and trying to predict just how much and when growth will slow. Which led me to the question: am I trying to be accurate or am I just guessing with nicer formatting?

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Surely Damodaran will disagree

Here’s what I find funny, NYU Stern’s “Dean of Valuation” Aswath Damodaran, the professor whose lectures are responsible for educating this generation of analysts in not just how these models work but how to create them, actually agrees with Buffett:

This is a strange thing to hear from someone whose own textbook is thick enough to prop open a castle gate, but there it is, and it lines up suspiciously well with what Buffett and Munger were saying too.

Damodaran quite literally advocates for keeping your models to one or two points in which you have the most certainty. He has stated on a number of occasions that the bigger the model the less accurate it becomes and that makes sense when you think about it. It only takes one moving part near the top of the model - especially one that the other figures rely on - to throw out every calculation made afterwards. Damodaran tells us not to do it.

Peter Lynch will save us, right?

I’ve written about Lynch before, so I won’t rehash his life story, but there’s one thing about him worth discussing again because I think it’s been mangled almost beyond recognition. Everyone knows the line, or a version of it, about explaining a stock to an eleven year old in under two minutes or crayons or whatever. Somewhere along the way an entire generation of investors decided this meant you needed forensic technical mastery before you were allowed to buy anything, as though the rule was actually “you must be able to explain, in full anatomical detail, precisely which hole the alien farts out of,” rather than the much more sensible thing Lynch was actually pointing at, which is that the business itself needs to be simple enough to survive being explained to a child. Not what you understand - what the business actually does.

And he repeats it again when he talks about computers, that you don’t need to know a machine’s specifications, its clock speed or its memory or whatever the current buzzword is, to work out whether a computer company is shifting a lot of units and making healthy margins doing it. Somebody in the building genuinely does need to understand the engineering, it simply doesn’t need to be you, and pretending otherwise is how people talk themselves out of perfectly good, perfectly obvious moves while waiting to feel qualified enough to deserve to invest in them.

Why We Do This To Ourselves Anyway

If I’m honest about why I used to build spreadsheets, I don’t think it’s really about getting a better answers. I think it’s more like I felt like I was doing something, and a ten-tab model is a wonderful place to hide from a decision I was a little afraid of. It’s much easier to say my spreadsheet was wrong rather than admit something worse.

There’s also a social element to it too. A spreadsheet is evidence, it’s something you can point to. If the position works out, you did the work and the work paid off. If it doesn’t, the model was wrong rather than you being wrong, which are subtle differences that matter enormously to the ego. The model absorbs the blame so you don’t have to.

And there’s another thing, complexity can feel like rigour, like I’ve done the hard yards. Multiple tabs each with sensitivity analyses and Monte Carlo simulations feels much more serious than looking at a business for twenty minutes and concluding that it’s obviously good or obviously not. The elaborate model gives the impression of precision, even when what you’ve actually done is taken a series of guesses and presented them in a format that looks calculated. Damodaran himself calls this “garbage in, gospel out.” The model doesn’t know your assumptions are heroic, it just does the maths.

Covering Arse

I don’t think any of this is licence to go and buy whatever the 212 Community is frothing about this week, and I should be annoyingly clear about that before someone quotes this piece back at me in six months from a now much smaller portfolio. Buffett and Munger could skip the audit because they spent decades reading balance sheets so that they knew, within minutes, roughly what they were looking at, and they were only willing to move that fast on businesses obvious enough not to need the extra measuring (They could probably smell a good business on the way in.). The precision they were skipping was never about whether the thing was good. It was precision about a question that had already been answered the moment they walked in the door.

So maybe the actual skill isn’t about doing less work, it was knowing whether the extra work you’re doing is judgement, or just worry hiding behind a spreadsheet.

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I don’t feel this in the abstract way most personal finance writing feels it, I feel it because of two specific afternoons.

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The Day Our Phones Stopped Ringing

The first was in the morning after Robert Peston had broken the news of the run on the banks in 2008. I was working in the construction industry, at a place that was still very much phone and fax rather than anything digital, we’d actually only just gotten rid of our typewriter - I shit you not.

We turned in and genuinely didn’t know if the phones were going to ring. For a lot of industries, that particular week was just something on the news. Construction, or at least my sub-sector wasn’t one of them. I remember the quiet more than anything, the quiet of a room full of people who knew they could be in trouble, just waiting to see whether the phone would move. It’s the clearest lesson I’ve ever had that the same national event can be just background noise for one person and the opposite for another, entirely depending on which industry you happen to be standing in when it lands and through no fault of your own.

The Impossible Choice

The second was about a decade ago, I was working at a start-up that had made the classic mistake of being far too concentrated on a single buyer, we had chased the easy money and failed to use it to diversify our income. The big buyer went kaput, we’d had little warning, some rumours of cashflow troubles but by this point we were indebted and in such a position that we had to hope they’d survive, they didn’t and we had to shrink fast. In a team that small there was nowhere to hide and I was tasked with choosing which of two people to let go. One name on the list was Tom, who was seventeen, we’d only just taken him on. The other was a man roughly my own age, who I won’t name, but his step-daughter had died just a few months before.

I decided against picking and handed in my own resignation instead. And whilst it didn’t save the business in the end, I hope it bought them some breathing space when they needed it most, and to be honest, I’ve never regretted it. I mention it not for sympathy but because it’s the clearest picture I have of what concentration risk actually looks like once it stops being a line in the notes of the “risks” section. It isn’t a chart, it’s an unbearable choice landing on a Tuesday morning, affecting someone who did nothing wrong.

Emergency Funds

I say all of that to explain why I take emergency funds more seriously than most. The standard guidance is 3-6 months of essential expenses, essential meaning the number that keeps the lights on not your lifestyle spend and that gym membership you’ve been meaning to cancel. Where you land within that range depends on how exposed you actually are. A dual income household with stable, yet replaceable jobs can probably sit at the lower end. A single income household, or maybe a specialised role, with dependents, a mortgage rather than rent, all push you toward the higher end, and in my view, past it.

The whole point of this money is to be able to cash it in without a delay or penalty, and for me that rules out anything invested - however safe it looks on the label. In the UK that generally leaves a couple of places, an easy access savings account actually paying a competitive rate, or Premium Bonds, popular for reasons beyond the maths, since there’s always the small, ridiculous chance of winning the million - a bit like playing the lottery except you get your capital back. Either is fine in my opinion, the only real requirement is that you never have to ask permission, or accept a worse price to get your money back liquid.

Why Credit Doesn’t Count

I’d push back hard on the idea that a decent credit limit counts as an emergency fund, and I’ve seen it argued seriously, including by a very popular finance-adjacent YouTuber whose politics-and-money act I find contemptuous. When you don't care about your audience, you are unaccountable for how it plays out - as is the advice. He can shrug and say “sucks to be you” when the worst happens because there is no recourse. But it doesn’t suck to be you, it’s the advice that sucks, and the fault sits with the quality of the advice, not whoever was unlucky enough to follow it.

In the event of suddenly losing your job, a credit card will give you the exact opposite of what you need at the moment your options become more limited, a bill, maybe with interest attached, arriving at the worst time to be taking one on. Doing that on borrowed money doesn’t buy you breathing room, it buys you three to six months of expenses crystallised as debt. What happens if it takes you longer than that to find the next role? What happens if the provider discovers you’re unemployed and cuts your limit, entirely within its rights, at the exact moment you need it most? What if the downturn that cost you the job has driven your investments down too? This is the sort of environment that forces people into selling stocks at the worst possible prices, arguably the single most expensive mistake that an emergency fund exists to prevent.

I Don’t Think Six Months Is Enough

This is where I’ll be parting ways with the standard guidance. Six months is the minimum emergency fund I’d expect and for that to apply I’d want a liquid job market. If you work in a specialised or niche part of an industry where the honest number of suitable openings at any given time is already small, that size emergency fund might not cut it.

An honest calculation starts with how long it’s actually taken people in your field to land a role, then factor in a sector downturn. Be straight about your notice period, what redundancy pay you’d genuinely receive, and whether your skills transfer easily to the competition or you’d be starting from a dead stop - and then round up, not down.

The other thing this exercise tends to leave out is illness, either your own, your partner’s, or god forbid a child’s. A job loss comes with the comfort of being able to start looking for another immediately. An illness that pauses your ability to work, or pulls you out of it to care for someone else, doesn’t come with that neat timeline.

The Bottom Line

In practice, that’s meant letting mine grow beyond conventional guidance, sitting at around £30,000 now, and I’m not stopping there. I know full well this is spreadsheet inefficient. Any calculator will tell you cash sitting there uninvested is a drag on long-term returns, rather like how overpaying a mortgage rather than investing the difference rarely wins on the numbers either. And for what it’s worth I don’t overpay mine, but I’m aware it’s the same logic. I rationalise it by telling myself that some decisions aren’t there to maximise a number, they’re there to let you sleep, and that buffer is precisely what lets me hold the rest of my portfolio in equities without flinching, because the one scenario that forces long-term investors to sell at the worst possible moment, a job loss on top of a market fall, is the scenario I’ve carefully mitigated myself out of.

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The answer of course is…wait? Did you spot the gorilla? Watch it back again, roughly around the middle a gorilla walks into the shot, beats his chest and walks off. What the hell?

Don’t worry if you missed it about half the people watching don’t see the gorilla either. And it’s not because they’re thick. It’s because their brains are too busy counting passes, so it filters out everything else .

This phenomenon is called inattentional blindness or sometimes change blindness, it’s not related to a problem with your vision or any other deficits, just an inability for you to notice unexpected things when your focus is tightly on the task at hand.

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The Boiling Frog Syndrome

There’s an old saying - presumably by a French person - about boiling frogs. Essentially chuck a frog in boiling water and it will jump straight back out, but put the frog in cold water and slowly turn up the heat it will sit there like Sexy Beast until it’s cooked. (For what it’s worth this isn’t actually true - the frog jumps out regardless).

Inattentional blindness is why you can’t see your favourite company slowly deteriorating right in front of your eyes. It’s because your focus is on something else.

How It Happens

Let’s say you made an investment 5 years ago - a proper one, you did your homework found a dominant market position, good margins and a solid management team. Ticked all your boxes.

In year one: Revenue growth slows from 15% to 13%. “Law of large numbers”

In year two: Operating margins compress from 35% to 33%. “They’re investing in marketing, revenue growth will reinflect.”

By year three: Customer acquisition costs have crept up by 20%. “They’re spending to outcompete.”

By year four: Two key executives leave for “personal reasons.” “People can’t stay forever!”

Year five: They miss revenue and earnings and organise a restructuring. “One-time charges, macro headwinds, they’re addressing the issues”.

Individually, all of these are true, easily explainable and not worth panicking about. But look at the changes holistically, the company you bought 5 years ago no longer exists. You bought a leader, not deteriorating mediocrity.

And the reason you can’t see it? You’ve been watching it too closely.

The Familiarity Trap

Here’s the headscratcher: the more you know about something, the more susceptible you are to change blindness. Which seems counterintuitive, right? You’d think expertise would make you better at spotting problems. But it’s actually the opposite.

When you’re deeply familiar with a company, you develop mental shortcuts:

“They’ve always had strong margins.”
“Management always delivers.”
“This is a quality business.”

In life, these shortcuts are genuinely useful because they save mental energy - but in investing they become filters that screen out information that doesn’t fit the perceived pattern.

A fresh investor looking at the company for the first time sees declining revenue growth, compressed margins, rising costs, and executive turnover. They think “Hard pass.” You see the same data and think “Temporary issues, nothing’s really changed.”

Who’s right? One of you certainly is - but it’s not always you.

Lights Out

General Electric was the poster child for change blindness. For decades, GE was the blue-chip of blue chips, even Buffett owned it. When folks talked about “safe, reliable investments” they meant GE.

But deep inside GE, rot was setting in. Debt load had been steadily increasing, they had diversified into financial services that were very difficult to understand. CEO’s were only serving short terms and after multiple acquisitions the company was becoming complex and opaque.

This was visible to everyone that looked, but investors had been conditioned by decades of success - “GE will figure this out”. Change blindness changed every warning sign into just another small hurdle for GE to step over - just like they had previously.

And then they didn’t and the stock fell from $60 to $7 in a couple of decades. Shareholders that had held for decades watched their gains evaporate. Not because they weren’t watching, they were, but because they were counting the gains whilst the gorilla smashed up the foundations.

Fresh Eyes

This even affects the analyst profession. Often new analysts to stocks will have completely different takes to the veterans that have been covering for years - especially if the veteran has been covering favourably. We pass it off as fresh eyes, but it’s really another example of being blind to the changes.

This is because when you look at something for the first time, you see what’s actually there and start to build the narrative. When you’ve been looking at it for years, you see the narrative first and then what’s there. Your brain literally fills in the gaps based on patterns rather than reality.

This is why activist investors can show up, take one look at a company that everyone else thinks is fine, and immediately spot value-destroying decisions that have been happening for years.

How to Fight It

Unfortunately you can’t eliminate change blindness - it’s hardwired into how your brain works, but you can figure out workarounds.

Write down the original thesis and decide in advance what triggers would make you sell. In investing this is sometimes referred to as the tripwire. It could be revenue slowing, margin compression or like in modern times huge up-ramps in capital expenditures. Whatever it is, write it down and don’t rationalise it away.

When you’re reviewing earnings, be aware of what’s on the page and which bits your brain is filling in itself. Look at it with fresh eyes and say “would I buy it today on these metrics” - because if you won’t, why are you holding?

Seek others’ opinions. Find someone who doesn’t own the stock and ask them why not. Pay attention to the bears, they might not be right about everything, but they’re often right about deterioration. And lastly, watch for changes in narrative - if management stops talking about metrics they used to highlight, ask yourself why.

The Brutal Reality

The companies that destroy wealth don’t usually collapse overnight. They decline gradually, while shareholders who’ve held them for years insist everything’s fine.

Kodak didn’t go bust overnight and Blockbuster didn’t wake up one morning and realise streaming was a thing, the decline was visible for years. But the people closest to it - the long-term shareholders, the employees, the management - couldn’t see it.

Your portfolio right now probably has at least one company that’s slowly deteriorating. The competitive position is weakening and management are making questionable decisions. And maybe you can’t see it because you’re too familiar with it and your brain is screening out the warning signs to maintain consistency.

So here’s some homework: Look at your longest-held positions and pretend you’ve never heard of them before and look at the last five years of financials with fresh eyes. What’s the gorilla doing? Chances are, it’s not good and you’ve been missing it the entire time.

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I’ve been turning that over since I first heard it, because it gets at something that most financial planning completely misses, which is the question of what the money is actually for.

Not abstractly or philosophically, but in a practical sense. On the day when someone who loves you is trying to articulate what your life meant to them, what is it that you want them to say?

Kurzgesagt made a video a few years ago called “When This Number Hits 5200 You Will Be Dead”. The premise is simple: you have roughly 5,200 weeks in a 100 year human life, and when you lay them out visually you start to see how many are already gone, how many are being spent in modes you didn’t quite choose, and how few remain in the specific phases of life you actually care about and how many you lose when living to an average human age for where you live. The number that stopped me wasn’t the total, it was the subset - the weeks where Livvy is young enough to still think I’m the best thing in the world, still young enough to want to wash the car together (and not want £20 for it) and jump in puddles in her boots because Peppa Pig said so, still young enough that my presence is the event rather than a minor inconvenience she has to schedule around.

Those weeks are not infinite and quite frighteningly, they’re not even that particularly numerous when measured against a lifetime.

What This Has To Do With Investing

Here’s the connection that I think doesn’t get made clearly enough: the most prevalent point I can think of for building wealth is to buy back time, and time has a very specific value that changes depending on when you’re able to spend it.

Most investors talk about compounding in a money sense only - growing upwards over time. But the flip of that - the less considered take - is that time is also compounding away from you while thats happening, and the two curves, rather unhelpfully, are not moving in the same direction. The money gets bigger and yet, the window for certain experiences gets smaller. A portfolio that continues to grow impressively while the years when your children are small, or your parents are still here, or your knees still work pass largely unspent on things that matter isn’t a success story with a financial asterisk.

This isn’t an argument against saving or investing, I would never make that argument. The security that comes from a well-built financial position is real, dignity in retirement is something we should all strive for. The ability to not panic-sell when markets fall, to take on interesting work rather than necessary work and as I’ve scribbled before to eventually answer Liv’s “where me going” with “nowhere, I’m here” - all of that requires having built something first, the building is in service of the being present, and somewhere along the way a lot of people forget that, and the building becomes the thing they do instead of the life they were building toward.

The Thing Money Can’t Manufacture

The priest’s story cuts sharply because it reveals what survives when everything else has been stripped away. The university fees were real, as was the car and the deposits and the gifts and the practical acts of provision, all real, and of course they mattered. But they didn’t make it to the deathbed as the thing being reached for. What made it was something you can’t buy and can’t delegate and can’t schedule for later when you have more capacity.

Believing in someone. Showing up and being present in a way that the other person can feel.

The Kurzgesagt video ends with a thought: the quality of your life is determined less by its total length than by what you fill the weeks with while they’re happening, and the weeks that matter most are the ones that feel most ordinary at the time. Not the holidays or the milestones but the Tuesday evenings, the Saturday mornings, the unremarkable afternoons that your children will carry with them long after they’ve forgotten everything else.

I’m building a portfolio partly so that one day there are more Tuesday evenings that belong to me rather than to a building in town that I do not want to be in. But I’m also trying not to spend the Tuesday evenings I already have just building the portfolio (or worse staring at it!). It’s a balance that your financial plans don’t model, maybe can’t model.

The weeks are counting down and the money in my portfolio is growing. I’m early enough to know that the question isn’t whether I’ve blown it or not - the question is whether they’re moving in the right relationship to each other, and whether the person who eventually sits beside me at the end of it will reach for the financial stuff or for something that cost me nothing at all.

This post is sponsored by Trading 212.

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“I believe in the company” has become one of the most commonly used phrases in retail investing. It sounds like conviction. It sounds like the kind of long-term thinking that separates serious investors from short-term noise. What it actually is, most of the time, is faith standing in for evidence, and faith doesn’t pay dividends.

The tell is in the verb, belief doesn’t require updating, nor does it require evidence. It doesn’t require you to articulate what would change your mind. You can believe in something despite the quarterly numbers, despite the management departures, despite the competitive threats arriving from three directions simultaneously, because belief, unlike an investment thesis, has no falsification condition. You can’t be wrong, you just haven’t been proven right yet and in investing, that’s bad.

Try This Instead

Next time you find yourself defending a position by saying you believe in the company, stop and try to replace it with a single sentence that actually contains the thesis. Not “I believe in Apple’s ecosystem” but “I think Apple will generate $30 in free cash flow per share within three years, making the current price look cheap.” Not “I believe in the management team” but “I think this CEO will hit their 2027 revenue target because they’ve done it twice before at smaller companies in the same sector.” Not “I believe it’ll come good eventually” but - and this one is harder to say out loud - nothing, because if you can’t complete the sentence ask yourself why not? Do you even have a thesis at all?

The one-line thesis approach forces precision and creates a specific claim that time and evidence will either confirm or deny. It also tells you what to do when things change: if the claim is no longer plausible, the reason to hold the position has gone, and holding it anyway isn’t patience, it’s belief. In investing, if all you have is belief, you’re taking on extra risk, more than you might think.

What Risk Actually Feels Like

At home, I have a new appreciation and understanding of risk. Nappies only on at night now, which is a sentence I never expected to write in a financial newsletter but here we are, because potty training has genuinely given me a more visceral understanding of risk management than a decade of investing literature.

The risk is not theoretical and it does not announce itself. It manifests, silently, on the rug, and you become aware of it only when you catch the eye of something that has absolutely no business being there, barefoot, on a Tuesday evening. That brief moment between noticing and fully processing what you’re looking at has a quality I can only describe as clarifying. I knew the risk existed and I had accepted the risk as part of this current phase of life. What I had not done was properly internalise what it looked like up close, in practice, in my own living room.

This is exactly how most investors relate to portfolio risk. They know it exists, they’ve nodded at the disclaimer that capital is at risk, but they haven’t genuinely sat with what their specific risk looks like in practice. A friend of mine, we’ll call him “Saul Briscoe”, deals with this by writing down half his current portfolio value on a piece of paper and sticking it somewhere visible, preparing his brain for what feels to him like an eventual inevitability. It sounds dramatic until you consider that most investors have absolutely no idea how they’ll respond to a 40%+ drawdown until they’re in one, and by that point the decision has already been made for them by their nervous system rather than their strategy.

Risk Is Not A Straight Line

When people they think about risk and reward they often imagine two parallel lines going up together. More risk = more reward. It’s intuitive, tidy and wrong.

The actual relationship looks less like two parallel lines and more like the floor of my kitchen after spaghetti bolognese with my 2 year old. Taking on more risk does not reliably produce more return - it produces a wider range of outcomes, and at the high-risk end of that range, the most likely outcome is not extraordinary gain but permanent capital loss. The speculative micro-cap, the leveraged position, the undiversified bet on a single name in an early-stage sector - the nappy off approach to investing - these don’t sit at the top of a reward curve. They sit in a zone where the probability of losing everything becomes a real possibility rather than a theoretical footnote, and they tend to look exactly like genuine opportunity right up until the moment they don’t.

This is why risk-adjusted returns exist as a concept. Raw returns tell you how much money you made. Risk-adjusted returns tell you how much you made relative to how much you risked losing, and the ratio often tells a very different story. A portfolio that made 25% by concentrating everything in a single name that happened to win looks considerably worse on a risk-adjusted basis than a diversified portfolio that made 14%, because the first investor got lucky and the second investor built something durable. The relationship between risk and reward is real, but it has a ceiling, and beyond a certain point additional risk stops producing additional expected return and simply increases the probability of a catastrophic outcome that nobody fully imagined until it arrived.

The Practical Test

The honest question to ask about any position you hold is not “do I still believe in this?” but “what is my current one-line thesis, and is the evidence still consistent with it?” If the thesis is intact and the evidence supports it, hold with confidence. If the thesis has weakened but the price has also fallen, ask whether the new price adequately reflects the reduced probability of the thesis playing out. If the thesis has been invalidated and you’re holding because you believe it’ll come good anyway, you’re not an investor anymore. You’re a devotee, and the market has no theology.

Belief is a comfort and evidence is a tool. In investing, you only get paid for the second one.

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This post is sponsored by Trading 212.

If you’re looking for a new platform to start or continue your investment journey, you should check out Trading 212. You can sign up using the code “FTSE” to get a free fractional shares worth up to £100 or just click on this link;

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Whether he actually said it in those words barely matters anymore. What matters is that it captures something we claim to admire and almost never actually reward.

We say we value open-mindedness. We say we respect people who follow the evidence. And then, with remarkable consistency, we treat anyone who changes their position as weak, inconsistent, or worse - a flip-flopper, someone without the courage of their convictions. Conviction has become the virtue. Changing your mind has become the failure. This is backwards, and it’s costing people money, votes, and a great deal of unnecessary stress.

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Why We Reward The Wrong Thing

There’s a reason conviction feels more impressive than reconsideration. Conviction is simple to narrate. It photographs well. The person who said the same thing in January and is still saying it in December looks steady, principled, reliable. The person who said one thing in January and a different thing in December looks like they didn’t know what they were talking about the first time, even if the second position is demonstrably better informed than the first.

But steadiness and correctness are not the same quality, and conflating them is where the trouble starts. A position held since January isn’t impressive because it was held for a long time. It’s only impressive if it was right, and if it was right because the person genuinely understood something, not because they got lucky and then refused to update regardless of what happened next. We’ve built a culture that rewards the appearance of certainty over the substance of being right, and nowhere does this cost more than in investing.

The Investing Version Of This Mistake

Every investor has, at some point, bought a stock on a thesis that later turned out to be wrong. The information that comes after the purchase - a disappointing product launch, a regulatory setback, a competitor moving faster than expected, management making a decision you didn’t see coming - is new data. It changes the picture. And the single most expensive mistake an investor can make at that point is treating the original decision as something to be defended rather than something to be re-examined.

This is loss aversion teaming up with identity. Selling at a loss doesn’t just cost money, it requires admitting the original thesis was wrong, and admitting you were wrong feels considerably worse than losing the money itself. So people hold. They wait for vindication. They tell themselves a new story about why the original thesis still holds, even as the facts supporting that story get thinner. This is precisely the situation where the discipline to change your mind - to sell, to reduce, to admit the original case has weakened - is the single most valuable skill an investor can have, and it’s the one most consistently punished by our own psychology.

The same applies in the other direction, and it’s less discussed. Buying more of something because the facts have genuinely improved - because the company has executed better than expected, because a risk you were worried about has resolved favourably - also requires changing your mind, and it’s often resisted for a different but related reason: doubling down on a winning position can feel like admitting you didn’t have enough conviction the first time, which is its own peculiar form of ego protecting itself from a different angle.

The Honest Investor’s Position

The honest position, the one that actually makes money over long periods, is to hold your thesis loosely enough that new information can genuinely move it, while holding it firmly enough that you don’t get whipped around by every piece of short-term noise that crosses your screen. That’s a difficult balance, and it requires separating two questions that get muddled together constantly: has anything fundamental actually changed, or has the price simply moved and made me uncomfortable?

If a stock falls 20% and nothing about the underlying business has changed, that isn’t new information requiring you to update your view - it’s the market being the market, and changing your mind because of it is just succumbing to noise. But if a stock falls 20% because the company has genuinely lost a major customer, or a key patent has been overturned, or a competitor has launched something materially better, that is new information, and the investor who refuses to update their thesis purely to avoid looking inconsistent is making exactly the mistake we’re describing. The skill isn’t holding firm. The skill isn’t changing your mind quickly. The skill is being able to tell the difference between noise and signal, and being willing to act on signal even when it means admitting the original call was wrong.

Which Brings Us To Politicians

This is, almost as an afterthought, where the politician u-turn fits in. We treat a change of policy position as evidence of weakness or dishonesty, a sign that someone never believed what they said in the first place. Sometimes that’s exactly what it is - a cynical repositioning with no underlying intellectual honesty behind it, purely a response to focus groups and opinion polling.

But sometimes it’s the opposite. Sometimes a politician changes position because the facts genuinely changed - new economic data, a policy that demonstrably isn’t working as intended, evidence from how a similar approach played out elsewhere. In those cases, the u-turn isn’t evidence they were never serious. It’s evidence they were actually listening, in exactly the way we claim to want from the people who hold positions of responsibility. We just don’t reward it, because conviction photographs better than reconsideration, and a chorus of “flip-flopper” generates more clicks than a measured “they appear to have updated their position based on new evidence.”

Whilst this was never intended to be a defence of politicians (because who the f*ck would want to do that?), it's worth noting that your own negativity towards a U-turn can effect your ability to perform one, especially when your portfolio or a position is giving you all the signs that you should do.

What This Is Actually Asking Of You

None of this is an argument for having no convictions or for changing your mind constantly in response to every passing headline - that’s just a different kind of failure, the investing equivalent of trading on every piece of noise that hits your phone. It’s an argument for holding your convictions with the right amount of grip: firm enough to withstand genuine noise, loose enough to bend when the facts actually change.

The discipline isn’t conviction. The discipline isn’t flexibility either. The discipline is knowing, in any given moment, which one the situation actually calls for - and having the honesty to admit it when the facts no longer support the position you started with.

When the facts change, change your mind. The market doesn’t care how committed you were to being wrong.

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My original Switch had been subjected to an accidental basketball incident - Livvy was playing, the ball came off the console, and the thing hasn’t worked quite right since. The replacement I eventually found was a good condition used Switch 2 on eBay for £300. The £300 represented, and this isn’t a boast but simply relevant context, approximately 0.01% of my current portfolio value. I could have bought a considerable number of Switch 2s without the number on my investment app moving in a way I’d notice.

I still spent two months thinking about it. I read reviews I didn’t need. I checked whether the original games would transfer over at least six times despite knowing the answer. I replayed an internal monologue about whether this was frivolous on the way to work. I ended up on eBay because finding a used one helped me feel like I was at least being sensible about it, which tells you everything about the state of mind I was in over a £300 decision.

This is a problem. Not now, particularly, but as a preview of a much bigger problem that is quietly approaching: retirement. Because if I can’t comfortably spend 0.01% of my portfolio - I wasn’t even drawing from the portfolio - on something that will give me hundreds of hours of enjoyment without turning it into a months-long psychological ordeal, I genuinely don’t know how I’m going to cope with drawing down the thing at retirement that I’ve spent my entire adult life building.

The Saver’s Identity Problem

Most serious investors are, at their core, savers. The habit that builds wealth over decades - spend less than you earn, invest the difference, leave it alone, resist the urge to touch it - is a deeply ingrained identity. You become the person who doesn’t spend unnecessarily, who thinks carefully before parting with money, who finds quiet satisfaction in watching the number go up. This serves you extraordinarily well during accumulation, and is, when accumulation ends, a machine that needs to be put into reverse - which nobody really tells you how to do.

The research on this is consistently striking. Most retirees spend the early years of retirement continuing to save, not because they need to but because the habit is too embedded to switch off. Studies of actual retiree spending show that people with substantial pension wealth typically draw down only the income generated and leave the capital entirely untouched. They spent forty years building the thing and then, when the time comes to use it, they can’t bring themselves to.

This is the Switch 2 problem, but on a scale that actually matters.

When The Switch Flips The Other Way

Not every investor arrives at this problem from the same direction. The classic saver who can’t spend is one route. But there’s another version that’s less discussed and equally real: the person who started out as a natural spender, found investing, fell in love with a different version of themselves, and now can’t switch back.

This person had a champagne lifestyle on lemonade money in their twenties - spent freely, didn’t think much about tomorrow, lived well in the present tense. Then something clicked and they discovered investing, and with it a version of themselves that saves, compounds, watches the number go up, and feels genuinely proud of the discipline required. That version felt better and more considered, maybe more in control. So they kept being that version.

The problem is they quietly retired the spending version without quite intending to. Champagne lifestyle on lemonade money became champagne money and a lemonade lifestyle, and the gap between what they could afford and what they allow themselves is widening every year. For this person, retirement isn’t just a financial transition - it’s a permission slip they’ve been waiting decades to write, and the challenge is actually writing it rather than finding reasons not to.

What Bill Perkins Got Right

Bill Perkins wrote Die With Zero in 2020, and the central argument is worth engaging with honestly: if you die with money left over, you worked hours of your finite life to earn it and then failed to convert it into the experiences that would have given your life more meaning. Every unspent pound at death represents time you sold that you never reclaimed. The goal isn’t irresponsibility, it’s intentionality - spending before you no longer have the health, energy, or desire to enjoy what money can buy.

Perkins is particularly sharp on timing. You can’t ski aggressively at 80. You can’t backpack with toddlers at 60 - well, technically you can, but you’ll know about it the next morning. His concept of “time bucketing” - planning experiences against the specific decades when they’re actually possible, not just when they’re affordable - is genuinely useful and underused by most people who think about retirement.

I don’t fully agree with Die With Zero as a philosophy. I think wanting to leave something for Livvy is rational and meaningful, not just a failure to spend on myself, and Perkins somewhat dismisses inheritance as evidence of poor planning rather than intentional generational care. But the core lesson - that there is a real and measurable cost to hoarding money you could be using, and that timing matters enormously for experiences that make life feel well-spent - is right, and it’s what the saver’s identity most resists.

Applying The Spending Brakes Slowly

Morgan Housel’s latest book, The Art of Spending Money, argues that when deciding between spending and saving, the goal should be minimising future regret. Not maximising returns, not optimising the spreadsheet, but asking which choice you’re least likely to look back on with regret from the other end. He cites author Tim O’Reilly on what the money is actually for:

You built the car, you filled the tank, now actually drive somewhere.

The practical answer is to start practicing now - not dramatically, not in a way that undermines the actual strategy, but in small deliberate ways that retrain the brain’s relationship with spending. The Switch 2 should have taken me an afternoon to decide, not two months. The fact that it took two months is information about a habit that will need to change before it becomes the thing standing between me and actually enjoying the retirement I’m building toward.

Perkins talks about the “memory dividend” - the idea that experiences gain in value over time because you continue to benefit from the memory long after the experience itself has ended. A holiday at forty that you still talk about at seventy paid dividends for thirty years. The Switch 2, more modestly, will provide hundreds of hours of entertainment and the occasional shared moment with Livvy when she decides she wants a go. That’s a reasonable return on £300. I knew this two months ago, my brain didn’t care.

The transition from accumulation to decumulation isn’t just a financial shift, it’s an identity shift, and identity shifts don’t happen automatically when a calendar date arrives. They require practice, which means starting to spend thoughtfully and without excessive guilt before you reach the point where spending thoughtfully is the entire job. The goal isn’t to spend recklessly, and it isn’t to die with zero, but somewhere between the two there is a version of this that makes the decades of careful building actually worth it.

I bought the Switch 2. It took too long to decide, and I knew that at the time, and I did it anyway. That’s the practice working, just very slowly.

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This post is sponsored by Trading 212.

If you’re looking for a new platform to start or continue your investment journey, you should check out Trading 212. You can sign up using the code “FTSE” to get a free fractional shares worth up to £100 or just click on this link;

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Terms Apply. All content is for informational purposes only and is not investment advice. Trading 212 is a platform for investing, and as with any investment, your capital is at risk.

The standard pitch for volatility-as-friend goes something like this: markets panic and overshoot, good companies get dragged down along with bad ones, and the investor with the patience to buy when everyone else is running for the door gets rewarded when the dust settles and the price finds its way back to something sensible. Benjamin Graham put it even more plainly: price movements have only one meaningful use for a serious investor - they provide an opportunity to buy wisely when prices fall and sell wisely when they’ve run up too far. Volatility is the mechanism. Without it you just pay fair value every time, and the edge disappears.

All of that is true, and it’s worth being honest about when it stops being true.

Morgan Housel has a useful reframe for this: volatility isn’t a fine for bad behaviour, it’s a fee. It’s the unavoidable psychological cost of admission required to achieve long-term superior returns - though it’s worth noting he’s largely talking about broad index funds when he says this, not individual stocks, which carry their own additional layer of risk on top. Avoid the cost, and you forfeit the prize. But knowing you’re paying a fee and knowing what you’re getting for it are two very different things, and that’s the part worth thinking about carefully.

When Volatility Really Is Your Friend

Volatility works in your favour when you understand the business well enough to have a view on what it’s actually worth, the company’s underlying position hasn’t changed along with the share price, and you can hold your nerve - or buy more - while the market is doing something dramatic.

That last bit is the one that tends to fall apart in practice. Buffett can sit through a position falling 30% because he has essentially unlimited patience, no obligation to sell, and has been through enough cycles that a bad quarter genuinely doesn’t trouble him. Most of us are checking the app on our phones and not sleeping very well, and the volatility that reads as opportunity in a shareholder letter feels rather different at midnight when you’re down significantly and the portfolio shows no signs of recovering.

This isn’t a reason to abandon the strategy. It’s just an honest admission that executing it requires more psychological resilience than the textbook suggests, and anyone who tells you it’s easy has either never lived through a serious drawdown or has conveniently forgotten what it felt like.

When Volatility Is Misaligned

Here’s the distinction that matters most: volatility that has nothing to do with the underlying business is very different from volatility that reflects genuine uncertainty about whether the business actually works.

A well-run company with loyal customers, stable revenues, and a solid competitive position getting dragged down for six months because of broader market sentiment or a single bad quarter - that’s the good kind of volatility. The business hasn’t changed, the market has just changed its mood, and the gap between price and value is temporary. That’s exactly the scenario Buffett is describing when he talks about welcoming price swings.

But a company whose share price is bouncing around because nobody is quite sure whether the model works, whether the management team can deliver, or whether the market opportunity is anything like what the investor presentation claimed - that volatility isn’t opportunity, it’s information. Buying into that kind of price action and calling it patience isn’t a strategy, it’s hope with a convincing accent.

Jeremy Grantham put it well: “Volatility is a symptom that people have no clue about the underlying value.” When that’s true of the market but not of you, buying the dip makes sense. When it’s true of both the market and you, you’re just adding to something you don’t understand because it got cheaper.

A Live Example Worth Sitting With

As of writing, Micron is down around 18% over the last month, SanDisk down 28%, SK Hynix down 27%, all while the S&P 500 has crept just 1.53% higher. These are serious businesses in the middle of a genuine AI infrastructure buildout, and yet the memory and storage end of the semiconductor market has been sold off hard while the broader market barely noticed.

The optimistic reading is straightforward: a macro rotation and profit-taking in a sector that ran very hard, with no material change to the underlying demand for high-bandwidth memory. If that’s right, the volatility is the fee, the thesis is intact, and patient investors are being offered an opportunity.

The more cautious reading is that the market knows something about inventory cycles and pricing pressure that isn’t fully visible yet in the numbers, and the sell-off is information rather than noise.

Here’s the honest bit: there’s an inherent smugness to watching a sector fall and thinking “those are just the idiots selling, I’ll take those cheap shares off them.” And sometimes that smugness is entirely warranted. But I find myself wondering how much of the confidence we see in moments like this is genuinely earned, and how much is the Grantham problem in disguise - volatility as a symptom of people having no clue about the underlying value, applied just as much to the buyer as the seller. Before the smugness is warranted, the homework has to be done.

When Volatility Is Working Against You

There’s a third version that gets left out of the friend-or-enemy conversation entirely, and it costs people a lot of money.

Smaller, thinly traded stocks can move 20% in a day on essentially no news - because a single large holder decided to sell, because someone with a following mentioned it, or because people who got in cheaply decided the price had moved far enough and started heading for the exit. This isn’t the market having one of its moods, it’s a fragile situation behaving exactly as fragile situations behave, and the volatility is perfectly aligned with the company’s position rather than misaligned from it.

Pump and dump operations run on exactly this dynamic - the price goes up sharply on coordinated chatter or paid promotion, newer investors interpret the movement as evidence that something is happening, buy in, and discover that the movement was the whole thing. The FCA received over 25,000 investment fraud reports in 2024, many following this pattern. That volatility was never your friend. It was the mechanism.

The Question Worth Asking

When a stock in your portfolio is moving sharply, in either direction, the right response is never automatic. The question is always: what is this movement telling me, and do I understand the business well enough to know whether the market is wrong?

If yes, and the movement reflects sentiment rather than something fundamental that’s actually changed, and you can hold or add without it keeping you up at night, then volatility genuinely is your friend and the invitation is real. If the honest answer is that you’re not sure why it’s moving, or you don’t know whether the underlying thesis still holds, or you’re reasoning from the price rather than from your understanding of the business - then it isn’t your friend. It’s just noise turned up loud, and buying into it isn’t discipline. It’s expensive guessing in a confident voice.

Volatility is a tool. Like most tools, it works well in the right hands and causes real damage in the wrong ones.

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This is nostalgia bias, and few British companies illustrate its cost more clearly than HMV.

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Loving The Shop Is Not The Same As Understanding The Business

HMV opened its first store on Oxford Street in 1921 and became, for the better part of a century, the dominant force in British entertainment retail. In the 1960s it accounted for around 70% of all recorded music sales in the UK, and even into the 1990s held something like 40% market share, with the flagship Oxford Street store pulling in over nine million visitors a year at its peak. HMV floated on the London Stock Exchange in 1998 at a valuation near £1 billion, and by the mid-2000s was worth over £1.2 billion. For an entire generation, a trip to HMV wasn’t really shopping, it was closer to a ritual.

Then came Amazon, then Napster and the file-sharing era, then Spotify in 2009, and HMV’s response to each was the response of a company that genuinely believed the affection people felt for it would carry it through. It didn’t. Shareholders who held on, many by their own accounts partly because they loved the brand and assumed it would find a way, watched the company breach its banking covenants and collapse into administration in January 2013, with debts of around £170 million.

Hilco rescued it for roughly £110 million, slimmed it down, and leaned hard into the vinyl revival, and for a few years it looked like the story might have a second act. It didn’t last, HMV collapsed into administration again in December 2018, and in 2019 the brand and remaining assets sold to Canadian retailer Sunrise Records for £883,000 - a company that had floated near £1 billion, sold for less than the cost of a decent flat in Zone 2. The brand survives today, smaller and under different ownership, largely because new owner Doug Putman correctly identified that nostalgia and vinyl culture could sustain a much smaller business. But the shareholders who held through the original collapse, believing in the name rather than the numbers, were wiped out long before that second act began.

The Same Trick, A Different Childhood Memory

HMV isn’t really about HMV. It’s about anything that once made you feel something pure and uncomplicated, and the danger of letting that feeling drive a financial decision years later. For plenty of people, that feeling isn’t a record shop. It’s a rocket launch.

There’s a particular kind of awe that watching a rocket leave the ground produces, close to the feeling a record shop gave a teenager, just on a bigger scale. Between 2019 and 2022, an entire wave of space companies went public via SPAC, riding precisely that emotion into public markets, and investors who’d grown up watching shuttle launches piled in. Virgin Galactic peaked at a market cap north of $14 billion in February 2021, for a company that had completed zero commercial spaceflights. Roughly $50 billion in paper wealth evaporated from the broader space SPAC cohort between mid-2021 and the end of 2023. Astra suspended its launch programme. Virgin Orbit went bankrupt. Several SPAC-era names fell 80 to 95% from their peaks, and the awe that got investors in the door had nothing to do with whether any of these were actually good businesses.

This is also why SpaceX, going public at a $1.75 trillion valuation with a $75 billion raise, deserves a more careful look than the emotion alone would suggest. SpaceX has genuinely earned a portion of the goodwill the SPAC-era companies borrowed without justification, having launched, landed, reflown and delivered at a scale none of its failed predecessors approached. But a trillion-dollar-plus valuation is still a valuation, and the same nostalgic awe that made people overpay for Virgin Galactic in 2021 is precisely the emotion that makes a headline number like that feel unquestionable rather than worth interrogating. The company being real and excellent doesn’t automatically mean it's a good investment. That’s a separate question, and it’s the one the awe tends to silence.

Why This Feeling Is So Powerful

Nostalgia is, neurologically, one of the more potent emotional experiences available to us. It activates reward circuitry in a genuinely pleasurable way, regardless of whether the thing being remembered still deserves the warmth attached to it. This is precisely the problem when nostalgia gets applied to an investment decision: the brain isn’t pricing the company’s competitive position, its balance sheet, or its actual trajectory against a changing market. It’s pricing a memory, and memories don’t update when the quarterly figures come in.

There’s a social dimension too. Buying or holding the shares of a brand you grew up with can feel like an act of loyalty, a small tribute to a version of yourself the shop once delighted. Selling it, or simply admitting the thesis has failed, can feel uncomfortably like betraying that earlier self. Investors held HMV through years of declining sales and repeated profit warnings, because admitting the brand wasn’t what it used to be felt close to admitting that they weren’t either.

The Tell-Tale Signs You’re In The Trap

The first sign is defending a position with emotional language rather than financial language. If your case for holding leans on “they’ve weathered storms before” or “I just can’t imagine the high street without them” rather than anything resembling revenue trends or competitive position, you’re reasoning from nostalgia rather than analysis.

The second sign is treating repeated turnaround attempts as evidence the next one will work. HMV announced restructuring plans and strategic pivots on a fairly regular cycle for two decades, and each time a portion of its loyal customer and shareholder base treated it as the moment things would change. Sometimes companies do turn around. Far more often, repeated failed turnarounds are evidence the underlying problem is structural, and the market usually recognises that faster than the emotionally invested shareholder does.

The third sign is looking at a sharply lower share price and feeling that the gap to former glory represents opportunity rather than a re-rating that reflects genuinely changed fundamentals. A stock that’s down 90% isn’t automatically cheap. It might simply be correctly priced for a much weaker business than the one you remember from Saturday afternoons in your youth.

What To Do Instead

None of this means ignoring brands you have genuine insight into - some of the best investment theses come from people who understood a product’s appeal before the wider market did. The distinction is whether your affection is generating an actual analytical edge, or whether it’s simply providing emotional cover for ignoring deteriorating fundamentals.

A useful test: would you buy this stock today, at this price, with these results, if you’d never set foot in the shop as a teenager or watched the launch live? If the answer is genuinely yes, your affection and your analysis happen to align, a pleasant coincidence rather than a reason for concern. If the answer is no, the nostalgia is doing work the numbers should be doing instead.

HMV gave a generation something real. That’s worth remembering fondly. It was never, on its own, a reason to hold the shares.

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And this is precisely where the thinking goes wrong, not because GTA6 won’t sell well - it almost certainly will - but because the question was never whether GTA6 would sell. It was always whether TTWO at its current price already reflects what everyone already knows, and whether there’s anything left that the market hasn’t priced in.

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The Known Known Problem

A couple of weeks ago, pre-orders for GTA6 opened. Within 24 hours, French retailer CDdiscount reported six times more pre-orders than Call of Duty typically generates across an entire pre-order window, with day one sales projections ranging from 25 million units at the conservative end to 45-70 million across the full launch window. TTWO’s stock fell nearly 3% on the announcement.

This is the market telling you something important. The pre-orders confirm what everyone already believed, that the game will be enormous, but the stock had already been pricing in an enormous game for months. Investors were positioned ahead of the catalyst, and when it arrived and confirmed expectations rather than dramatically exceeding them, the early buyers sold into the excitement of everyone buying on the news. This is called a sell-the-news event, and it’s one of the most reliable patterns in markets precisely because it repeats every time a well-known catalyst becomes a known known. The known unknowns are what the market prices in advance. The known knowns are what it’s already priced. You make money in the gap between the two, not by confirming what was never in doubt.

Where The Actual Edge Is

What’s more interesting than GTA6’s launch week sales is what nobody’s currently pricing with confidence. GTA6 Online has no confirmed launch date. GTA5 launched without its online component, which arrived two weeks later and went on to generate billions over the following decade, and Bank of America raised its price target on $TTWO last week specifically on revised GTA Online monetisation estimates rather than box sales. There’s also a PC version of GTA6 that almost certainly arrives eventually, since Rockstar always treats PC as a separate later release - and that upside currently sits in nobody’s model, because the market knows it’s coming but hasn’t been told when, so it hasn’t been properly priced in yet. That’s where edges live: not in confirming the obvious, but in the parts of the story that are real, probable, and still unpriced because the timeline is uncertain.

The Smaller Flywheel Within The Bigger Business

This framework applies well beyond gaming, and one of the cleanest examples sitting in plain sight right now is Deckers Brands and its HOKA running shoe label.

For years, Deckers was a UGG company that happened to also own some smaller labels nobody paid much attention to, HOKA among them. UGG was the recognisable name, the seasonal boot brand, the one that made the headlines and dominated the revenue line. HOKA was a niche performance running shoe with a loyal but small following. Then it kept growing, year after year, well after most casual observers had stopped checking in on it. In the fiscal year just reported, HOKA generated $2.59 billion in revenue, up 16% on the year, and now accounts for nearly half of the entire group’s sales. UGG, still technically the larger brand at $2.74 billion, grew a more modest 8% over the same period, and management itself has effectively conceded that HOKA is now the primary growth engine of the business going forward, with UGG settling into a slower, steadier supporting role.

Anyone who looked at Deckers five years ago and saw only a UGG boot company missed the thing that mattered. Run the numbers back to fiscal 2021 and the gap becomes stark: HOKA has compounded revenue at roughly 35% annually over the past five years, growing from $571 million to $2.59 billion, while UGG has compounded at closer to 10% a year over the same period, growing from $1.72 billion to $2.74 billion. UGG was always the bigger number. HOKA was always the faster one, by a margin wide enough that, given enough years, the faster one was always going to close the gap. The flywheel was spinning quietly inside a business the market had filed under a completely different category, and it kept spinning long enough to become the dominant story rather than the footnote.

What To Actually Look For

Finding these smaller flywheels before they become obvious requires a specific kind of attention that most investors don’t bother applying, because it’s genuinely more work than reading a headline.

Start with the segment breakdown in the annual report, not the headline revenue figure, and look specifically for any division growing meaningfully faster than the group average over several consecutive years, not just one good quarter. A single strong quarter is noise. Three or four years of consistent outgrowth against the rest of the business is a signal. Then ask what proportion of total revenue that division currently represents, because the real opportunity sits in the gap between a flywheel that’s growing fast but still small enough that the market hasn’t bothered to model it separately, and one that’s already large enough to be the headline story everyone’s watching. The sweet spot is the awkward middle, where the division is too big to ignore in the numbers but too small to have its own dedicated analyst coverage or investor narrative yet.

Finally, look at where management is actually putting capital and attention on earnings calls, not where the press release puts the headline. Executives often telegraph which part of the business they’re most excited about well before the market catches up, simply through what they choose to spend time discussing when nobody’s forcing them to. Who knows? You might spot the next AWS.

Known Knowns and Unknown Edges

The pub chain that sells more pints during the World Cup, the gaming company that sells more copies when its biggest franchise launches - these aren’t investment theses, they’re calendar entries. Everyone knows, especially the market. There’s nothing left to discover.

The edge is always in what’s less obvious: the monetisation model that compounds for a decade after launch, the shock release nobody’s modelled yet, the division growing quietly inside a business everyone has mentally filed under something else. You’re not looking for known knowns. You’re looking for the thing that’s real, durable, and hasn’t made the front page yet, because that’s where the return on actually thinking still lives.

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Liv’s relationship with the tractor is as follows: she turns the lights on, watches them for a moment, and then walks off. That’s it, the full extent of their relationship. The thing takes approximately three thousand AA batteries to power and she uses that power exclusively to illuminate a small plastic cab for thirty seconds before moving on with her life. Meanwhile her fave Xmas present was a £5 plastic indoor tent from Aldi with a cover that looks like a café. She plays with it every single day, drags it into every room in the house, and has never once appeared to grow tired of it.

The best toy she has, though, costs nothing. It’s the cardboard box that anything reasonably large arrives in. She crawls in, pulls the flaps shut, and shouts “Where me gone?” - as if we didn’t just watch her get in it, and can’t hear her shouting from inside it. Then she bursts out going “Boo” and we do our best shocked faces, which is its own performance art by this point. The box is a fort, a car, a castle, a café, a submarine. It requires nothing except the imagination to decide what it is today, which a two-year-old has in quantities that most adults have long since spent.

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The Dopamine Inflation Crisis

In investing, there’s a fundamental difference between nominal returns and real returns. Nominal is the green percentage on your statement. Real is what’s left after inflation has taken its cut - if your portfolio grows 8% but everything you buy costs 9% more, the green number is a comforting lie.

The human brain runs the same ledger. The currency is dopamine, and the inflation rate is called hedonic adaptation. When you have very little, your internal inflation is low and the real return on small things is enormous. The first car I bought was a D-reg Mini in pearlescent purple, though if you’d looked closely the predominant colour was rust. It had no seatbelts in the back. If you pushed past 35mph the bonnet catch would release and the bonnet would swing upward - I discovered that personally, seeing how fast it could go round a roundabout on the way home. It was a genuinely dangerous vehicle and the greatest thing I’ve ever owned.

That feeling - that unadulterated, disproportionate joy at something objectively terrible - is a high-inflation asset. The less you have, the more things feel like miracles.

As the savings accumulate and the salary grows, the nominal capacity to spend goes up while the real return flatlines. You find yourself spending a grand on a phone that’s 4% faster than the one already in your pocket, or tapping your card for a £7 oat latte not because it changes anything but because without it the morning feels somehow incomplete. You’re running faster and spending more just to maintain a baseline of not being faintly annoyed. What you’re really buying is the adult version of that stupid tractor: impressive on paper, lights on, no imagination required, and ultimately just a thing you trip over in the dark.

Emotional Contempt

The hidden tax on frictionless spending is that things bought without sacrifice carry no weight. When you were skint a purchase was high stakes - you’d researched it, saved for it, waited for it, and the anticipation did most of the emotional heavy lifting before the thing even arrived. Once there’s a decent pot behind you, spending a few hundred quid stops being a decision and becomes a rounding error.

We unbox the thing, scroll through it for ten minutes, toss it on the kitchen counter, and within a week it’s just more background clutter. We treat our expensive adult purchases with exactly the same emotional distance my daughter showed that tractor - lights on, lights off, move on. The box was better.

The trap of staying in a demanding job to buy future freedom is that your children don’t share your inflated currency, and we keep forgetting this. We project our expensive version of contentment onto them - the curated resort, the premium experience, the five-star wrapper - because we’ve convinced ourselves that memories require significant capital expenditure. On holiday I catch myself doomscrolling through the same feeds I scroll at home, in a slightly warmer location, vaguely wondering why the expensive holiday doesn’t feel the way the brochure suggested. Liv, meanwhile, has found a lizard and we “must come and see it!”.

We aren’t servicing her expectations. We’re servicing our own.

Enjoy The Little Things

You can’t match the baseline of a two-year-old - let’s be honest about that. The wiring changes as we grow up, the imagination compresses, and you can’t fully reverse that process no matter how many mindfulness courses you do, though mindfulness is at least trying: one of the standard techniques involves sitting with your hands on a rug or carpet and genuinely focusing on what it feels like under your fingers, which is essentially doing what Liv does with every surface she encounters, but having to be explicitly instructed to do it as a therapeutic intervention. We lose that presence somewhere along the way, and getting back to it is hard.

And of course the UK has just banned social media for under-sixteens, you’d assume partly because phones destroy exactly the kind of presence and imaginative engagement that makes a cardboard box a submarine. It’s a reasonable idea that unfortunately does nothing for those of us who are already hopelessly addicted and checking our feeds at the breakfast table while a two-year-old tries to show us a rock.

The answer probably isn’t matching a toddler’s dopamine settings. It’s just being a bit more deliberate about noticing the things that don’t cost anything - the box, the puddle, the plastic hose in the garden being aimed at your face with genuine malice. Rule 32 in Zombieland, if you’ve seen it: “enjoy the little things”. Not because wealth is bad, or because expensive experiences have no value, but because your real returns - the felt ones, the ones you actually remember - are highest when your baseline is low and your attention is present.

The tractor is now in the garage. The tent from Aldi was last a spaceship. The box from this morning’s delivery is a magic school.

I’ve got to go now and be scared when she jumps out of it to turn me into a frog.

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The answer, almost every time, was the same thing: the valuation was so compelling that the question stopped being “do we understand this business deeply enough?” and started being “can we see enough of the flywheel to take a calculated position while it spins up?”

What The Circle Actually Means

The circle of competence isn’t about intelligence or effort. It’s about accumulated pattern recognition - the kind of understanding that comes from years of watching a sector, knowing its rhythms, understanding what a good result looks like versus a lucky one, and being able to read a set of results without needing to Google half the terminology. Inside your circle, you have an edge. Outside it, you’re guessing with extra steps.

Charlie Munger was characteristically blunt about this: the trick isn’t to have a large circle, it’s to know exactly where the boundary is. Most investors get into trouble not because they wandered outside their circle but because they didn’t know they’d done it. The circle felt fine right up until it wasn’t.

Steve and I are not semiconductor engineers. We do not know what ion implantation is in the way that someone who has spent a career in the wafer fabrication business knows it. We do not have a drug pipeline analyst sitting in the corner of our recording studio telling us which phase three trial results to trust. Our circle is genuinely finite, and we know it, which is why stepping outside it is something we do rarely and deliberately.

The Flywheel You Could See From Space

In 2020, following the completion of Bristol Myers Squibb’s acquisition of Celgene for roughly $74 billion - one of the largest deals in pharmaceutical history - the combined company was trading at a valuation that looked, to put it generously, deeply out of step with what was sitting on the balance sheet.

As I said earlier we don’t have drug pipeline expertise. We couldn’t tell you with any confidence which oncology candidates were going to make it through FDA approval and which weren’t. What we could see, without needing to understand the molecular biology, was this: BMS had just acquired a company whose marketed products alone were valued at approximately $55 billion, while the pipeline - which included several near-term launches in oncology and immunology - had effectively been acquired for free given the deal structure. The market was pricing in significant integration risk and patent cliff anxiety while largely ignoring the compounding asset base underneath it. The combined company was projected to be more than 40% accretive to EPS in the first full year post-close.

You don’t need to understand a drug pipeline to recognise when something is cheap. The flywheel was visible - a growing product suite, a pipeline that even sceptics acknowledged had serious candidates, and a valuation that appeared to assume most of it would fail. That asymmetry was enough to step outside the circle, carefully, with eyes open about what we didn’t know.

Seeing The Supercycle

Axcelis is a manufacturer of ion implantation equipment used in semiconductor fabrication. Ion implantation, if you’re not familiar, is the process of injecting dopants into silicon or silicon carbide wafers to change their electrical properties - it is a technically demanding, critical step in chip manufacturing that requires highly specialised equipment and deep process knowledge. I have none of that knowledge. What I had was a thesis.

The thesis was simple: electric vehicles require silicon carbide chips for power management in ways that existing technology cannot serve at scale. Silicon carbide chips require specialist ion implantation equipment. Axcelis had a dominant market position in exactly that equipment, particularly its Purion platform, which had secured a foothold in SiC applications before the EV revolution had fully arrived in the share price. The global demand for SiC ion implantation capital expenditure was projected to exceed $6 billion by 2030. Axcelis was valued like a niche equipment supplier in a quiet corner of the semiconductor market.

We didn’t need to understand the physics of beam current levels or electron-volt ranges to see that the company sitting in the middle of that particular bottleneck - at that valuation - looked interesting. The flywheel, again, was visible from outside the circle: a constrained, specialist supply of something the world was about to need a great deal more of.

The Times It Didn’t Work

Honesty requires mentioning that this logic doesn’t always pay off, and we’ve been wrong with it too. There have been situations where we saw what looked like a flywheel spinning up in a sector we didn’t fully understand, stepped outside the circle because the valuation seemed to justify it, and discovered that what we’d mistaken for a flywheel was a fan with a broken motor. The asymmetry we thought we could see wasn’t real, or wasn’t durable, or depended on assumptions that didn’t survive contact with the market.

This is the cost of the approach, and it’s worth naming clearly: stepping outside your circle of competence with a compelling valuation argument is not the same as having inside knowledge, and the risk of being confidently wrong about something you don’t fully understand is higher than the risk of being confidently wrong about something you do. The circle exists for a reason.

Asymmetric Bets and What They Actually Require

What makes the occasional excursion outside the circle worth considering is the concept of asymmetry: positions where the downside is limited and clearly defined, but the upside depends on a catalyst that the market hasn’t yet fully priced. This isn’t a licence to speculate. It’s a framework for occasionally taking a carefully sized position in something you understand well enough - not completely - when the valuation provides a meaningful margin of safety against being wrong.

The key phrase there is carefully sized. Neither of these positions was a portfolio-defining bet. They were deliberate, sized to reflect the elevated uncertainty that comes with operating outside your circle, and held with the explicit understanding that the thesis could fail for reasons we hadn’t anticipated. The circle of competence doesn’t need to be a prison. It just needs to be a place you leave thoughtfully, with a clear view of what you’re betting on and a clear sense of what it would take to be wrong.

So stay in your lane. Unless the price is so good it gives you explicit permission to look both ways first.

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I say full time, we’ve both dropped a day each since. Worth less salary, worth more of her and to each other. But the bigger trade, the one that takes longer to pay off, is the one I think about on the walk back from nursery most days: the entire shape of my career, right now, is in service of getting to a point where I don’t have to do this calculation at all. Where the answer to “where me going” is just “nowhere, I’m here, let’s wash the car” - which is her latest obsession, mainly because it’s the one activity where she gets to soak me with the hose and there’s absolutely no comeback. That’s the end I’m working toward. It just happens to be a long way off, and the means to get there isn’t always something I love.

Which brings me to sunk cost, and why I think the usual way people talk about it is only half right.

The Half That’s True

Sunk cost fallacy is well documented and the standard version goes like this: you keep pouring resources into something because of what you’ve already invested, even when the data says it’s dead. The classic investing example is holding a stock because you paid £40 for it and it’s now £22 - the capital is already spent, holding it isn’t strategy, it’s grief wearing a suit. This part is genuinely true and worth internalising. What something cost you to build has no bearing on whether it’s the right vehicle going forward. Markets don’t care what you paid. Neither does the rest of your life.

Applied to identity, this is the version everyone reaches for: you spent fifteen years building a career, a reputation, a professional self, and walking away from it feels like admitting those years were wasted, so you keep going long after you’ve stopped wanting to. That’s real. I’ve felt it. But it’s not the whole picture, and treating all sunk cost as inherently irrational misses something important.

The Half That’s More Complicated

Here’s my own version of the story. I started as an apprentice at a design and engineering firm at sixteen, climbed my way up to a junior role over the next few years, and then left for university in 2008, during the financial crisis, not because I’d been made redundant but because I had a strong suspicion I was about to be, and term time was conveniently just around the corner. In the gap before university started I made ends meet teaching cricket in schools through the ECB’s Chance to Shine programme, which is its own story for another day. I studied marketing, advertising and PR instead of staying in engineering. Worked at Coca-Cola. Worked for a BBC offshoot. Did marketing for a college, then for a large door supplier, then joined a start-up that, in the end, failed.

And now I’m back at the same engineering firm I started at sixteen, except in a senior position with a salary that would have seemed absurd to the apprentice who left in 2008. I don’t love it here, if I’m honest. It isn’t the work I’d choose if money weren’t a factor. But walking away from it right now wouldn’t be escaping a sunk cost. It would be abandoning a position that’s working exactly as intended.

Because sometimes the climb up the greasy pole isn’t the goal, it’s the means. The handsome salary isn’t a trap I’ve talked myself into staying inside - it’s the thing that gets me to work-optional faster, that pays for the dropped Thursday, that funds the version of freedom where I get to choose how much of my daughter’s life belongs to other people and how much belongs to me. Staying in a role I don’t love, on purpose, with a clear-eyed sense of what it’s buying me, is not the same as staying out of fear of admitting I wasted the years getting here. One is strategy. The other is grief.

Telling The Difference

The test isn’t whether you love what you’re doing. Plenty of perfectly rational, well-run positions involve doing something you don’t love for a while, because the alternative is worse and the destination is worth it. The test is whether you can articulate, honestly, what the current position is buying you, and whether that purchase still makes sense given what you now know about what you actually want.

If the answer is “this salary is funding an earlier retirement, more time with my daughter, the dropped Thursday, the eventual exit on my own terms” - that’s not sunk cost reasoning. That’s a position you’re holding deliberately because the thesis still works, even if the day-to-day doesn’t spark joy. If the answer is “I’ve spent fifteen years becoming this person and I can’t bear to find out it wasn’t worth it” - that’s the fallacy, and it deserves to be treated as one.

The same hours, the same discomfort, the same Tuesday morning at a desk you’d rather not be at - it can be either thing, depending entirely on whether you know what you’re buying with it.

Where Me Going

I don’t know exactly when the maths flips for me, when the salary stops being worth more than the hour I don’t get with her in the morning. The next step is probably dropping a further day, going to three days a week instead of four - though I’ll admit I haven’t fully worked out that maths yet, and there’s a version of this piece in a year’s time that’s entirely about whether the numbers actually stack up. But I know it’s a real calculation, not a vague hope, and I know every year I stay in this role on purpose is a year closer to not needing to. That’s different from staying because leaving feels like admitting defeat.

She won’t remember most of these nursery mornings. I’ll remember all of them. And the whole point of the means I’ve chosen is that one day, not too far off I hope, the answer to “where me going” will be the only answer that’s ever mattered.

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Let’s start from the ground up.

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Earnings Are Telling You a Story. Free Cash Flow Is Telling You the Truth.

When a company reports earnings - net profit, earnings per share, operating income - it is reporting an accounting construct shaped by rules that have almost nothing to do with cash. Depreciation schedules, amortisation of acquired intangibles, revenue recognition timing, warranty provisions, restructuring charges that seem to recur every year despite being described as exceptional - all of it is legal, all of it is audited, and all of it can be used to make the reported number look considerably better or worse than the underlying economic reality.

This isn’t necessarily fraud, it’s the nature of accrual accounting, which matches revenues and costs to the period they belong to rather than when cash changes hands. Accrual accounting is genuinely useful for understanding long-term economics and genuinely susceptible to the kind of management judgement that, applied optimistically over several years, can make a struggling business look like a thriving one right up until the moment it isn’t.

Free cash flow cuts through most of this. The simple version - operating cash flow minus capital expenditure - tells you how much actual cash the business generated after paying to maintain and grow its asset base. You can’t fake cash, it either arrived in the bank or it didn’t, which is why serious investors treat free cash flow as the primary lens and earnings as a secondary check.

Free Cash Flow Is Great. Levered Free Cash Flow Is Better.

Standard free cash flow ignores the capital structure of the business - the debt it carries and the obligations that debt creates. A company generating £500m of operating free cash flow sounds healthy until you discover it has £300m of debt interest and repayments due, at which point the picture changes considerably. Levered free cash flow deducts those obligations and tells you what’s actually left for equity holders after the debtors have been paid. Watch leases too: lease interest and repayments are effectively debt obligations, but standard formulas frequently ignore them, masking a massive cash drain.

The formula isn’t complicated: operating cash flow, minus capital expenditure, minus debt repayments and interest. It answers the specific question: after this business has kept itself running and paid everyone it owes money to, what’s left for the people who own it? That’s the question you should be asking, and it’s remarkable how rarely it gets asked clearly.

But There’s a Problem. A Big One.

Here’s where it gets interesting, and where most retail investors get quietly taken for a ride.

When a company pays its employees partly or largely in stock - options, restricted stock units, performance shares - that compensation appears on the income statement as an expense, reducing reported profit. So far so good. But then something important happens: on the cash flow statement, that non-cash expense gets added back to net income when calculating operating cash flow, because no actual cash left the building. The employee received shares, not pounds.

This means levered free cash flow, as typically reported, includes the benefit of the work those employees did without counting the cost of paying them. The cash flow looks better than it would if you’d paid those people in actual money. And for many technology companies in particular, stock based compensation isn’t a rounding error - it’s enormous. Some companies report SBC running at 15%, 20%, even higher as a percentage of operating cash flow. Analysts who add it back without accounting for the dilution it creates, according to research published by Morgan Stanley, produced higher and more optimistic price targets than those who treated it as a real cost. Because it is a real cost.

NYU Professor Aswath Damodaran - arguably the world’s foremost authority on valuation - puts it plainly:

The fact that it was structured differently doesn’t change the economic reality. Shareholders got diluted. That dilution has a cost.

The Adjustment That Changes Everything

So the metric I actually use is this: levered free cash flow, minus stock based compensation, divided by shares outstanding.

Deducting SBC again - after it’s been added back in the operating cash flow calculation - treats it the way Damodaran says it should be treated: as a real economic cost, equivalent to cash, because it represents genuine value transferred from existing shareholders to employees. You’re asking: if this company paid its people in actual money instead of shares, what would the true cash left for shareholders look like?

And then the per share piece is what makes it genuinely useful for tracking growth over time. Per share metrics automatically account for dilution - if the company is issuing lots of shares to pay employees or fund acquisitions, the per share number reflects that erosion, even if the absolute number is growing. It answers the specific question I actually care about as an investor: is my slice of this company’s cash generation getting bigger or smaller? Not the whole pie, my slice.

Plot this number over five years for any company you’re considering and you will see its true character immediately. A company genuinely compounding value will show it growing consistently - not every year, investment cycles don’t work like that, but directionally and clearly over time. A company that appears to be growing in revenue and headline free cash flow but is simultaneously diluting shareholders through enormous SBC packages will often show this number going sideways or declining, even as the stock price rises on the back of a narrative. Eventually the narrative meets the number.

Why This Matters More Than Almost Any Other Metric

Most financial metrics can be gamed, ignored, or buried in footnotes. This one is considerably harder to hide from, because it combines the difficulty of manipulating actual cash flows with the discipline of the per share framing that forces dilution into the picture.

It also connects directly to what investing is actually supposed to be: a claim on the future cash generation of a real business, not a vote on a story. Every other metric - revenue growth, EBITDA margins, adjusted earnings, total addressable market slides in investor presentations - is ultimately a proxy for this number. Is the business generating more real cash attributable to you, the shareholder, than it was before? Adjusted levered free cash flow per share answers that directly, without the layers of accounting judgement and management narrative that sit between you and the truth in almost every other measure.

If a company’s adjusted LFCF per share is growing consistently and the valuation is reasonable relative to that number, you have the foundation of a position worth holding. If it’s declining while every other metric looks healthy, you’ve probably found the thing the investor presentation was hoping you wouldn’t notice.

The truth is in the cash. It always is.

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From 6 April 2027, anyone under 65 who keeps cash inside a Stocks & Shares or Innovative Finance ISA will have interest on that cash taxed at a flat 22%, deducted inside the wrapper. It sits alongside a cut to the cash ISA allowance for under-65s, down from £20,000 to £12,000, and a ban on moving money out of investment ISAs back into cash ones. Gilts are exempt. Money market funds are still allowed, but can no longer make up the whole of a non-cash ISA. Every design choice points the same direction: this is about stopping people using an investment wrapper as a disguised savings account, not about hoovering up revenue. Of course not all of this is concrete fact, we’ll get further information from HMRC later.

I wanted to know roughly how much revenue we’re talking about. HMRC hasn’t published what proportion of Stocks & Shares ISA money sits in cash rather than invested, so what follows is my own modelling, not an official figure, and I want to be upfront about that throughout.

Building the Model

Total UK Stocks & Shares and Innovative Finance ISA assets sit at roughly £511 billion. The unknown is what share of that is cash, waiting to be deployed, covering fees, or just forgotten about. Something in the region of 2.5% to 7.5% feels sensible, so I ran all three at an illustrative average interest rate of 3.5%.

2.5% in cash: a pool of roughly £12.8 billion, generating around £447 million in interest, for a gross yield of about £98 million

5% in cash: a pool of roughly £25.6 billion, generating around £894 million in interest, for a gross yield of about £197 million

7.5% in cash: a pool of roughly £38.3 billion, generating around £1.3 billion in interest, for a gross yield of about £295 million

Those are gross numbers, before anyone does anything differently. Nobody is sitting still and paying this.

The Behaviour Adjustment

A couple of platforms have indicated they’re considering slashing or scrapping interest on cash balances entirely, although this falls foul of a recent FCA ruling encouraging brokerages to pay more interest. However, since paying it just creates a reporting burden nobody wants. Investors with meaningful balances will likely move into short-dated gilts, explicitly exempt, or into money market funds structured to stay under the threshold. None of this requires sophistication.

I’ve assumed behaviour changes will result in a 65% reduction in the taxable pool once that shift takes hold, which feels conservative given how easy the gilt route is. Applying it:

2.5% in cash: net yield of roughly £34 million a year.

5% in cash: net yield of roughly £69 million a year

7.5% in cash: net yield of roughly £103 million a year

Set Against the Bigger Picture

HMRC collected £938.8 billion in total tax receipts in 2025/26. Even my highest estimate represents roughly 0.011% of that, a figure that would round to zero on most government spreadsheets. The lowest is closer to 0.004%. That’s raised through a measure requiring new legislation, new reporting infrastructure, and every platform redesigning how it withholds tax on cash balances.

If you were purely chasing revenue, you would not build this. The compliance cost, the platform engineering, the consultation, the confusion among savers who don’t read financial newsletters for fun, all of it dwarfs the money raised. Even PIMFA, representing the wealth management industry, has said it’s sceptical this will meaningfully change behaviour at all, and several platforms have warned it might put people off investing altogether.

So What’s Actually Going On

The honest answer is that this protects a different policy: the reduced £12,000 cash ISA allowance for under-65s. Without a charge like this, anyone wanting £20,000 sat in cash, tax-free, would simply park £12,000 in a cash ISA and the remaining £8,000 in a Stocks & Shares ISA held entirely in cash, achieving exactly the outcome the cap was designed to prevent. The 22% charge in the government’s mind, closes that gap.

For What It’s Worth

I’ll be honest, I think most people will hate this, and so do I. Anything that pushes people out of dry powder feels wrong on principle, because that cash is often sat there for a reason, whether that’s nerve, a pending purchase, or just not having decided yet. But it grates more here because the stated goal is getting more money into British assets, and this measure does nothing to make that happen. It punishes holding cash without offering any incentive to put that money into a UK company, a UK fund, or a UK gilt specifically. A carrot would have nudged people towards Britain. If this is supposed to be a replacement for the BISA or at least the aims the BISA had, it falls flat on every measure.

Governments introduce taxes to raise money or to change behaviour, and when a tax raises a rounding error against total receipts while requiring this much effort to implement, you’re looking at the second category. This one was never really about the cash, and I remain unconvinced it’ll do much for British investment either.

About twenty years ago, ten lads who didn’t want to do the typical sun holiday - two weeks horizontal by a pool felt wasteful when Andorra was somehow both cheaper and more interesting - had cobbled together a snowboarding trip through texts, phone calls, and an amount of paper planning that would seem absurd today. No group chat. Just a vague collective understanding that we were going, and somebody’s mate’s mate knew a place.

What actually happened was that the only road into Andorra from France was iced over and completely closed, so the airline rerouted us to Barcelona, where we found ourselves with an unexpected night in a city nobody had planned for, no itinerary, nowhere in particular to be. We found a bar near the Barceloneta beach. Plastic chairs, three-euro lagers, a table that wobbled if you put your elbows on the wrong side - this table seemed to have four wrong sides. We sat there for hours talking bollocks and it was, without question, one of the best nights of the trip.

The next day we coached in from the Spanish side where the road was clear, and checked into the hotel we’d booked by the only sensible method available - sorting by price, ascending, and selecting the first result. It was located at the bottom of a very long hill, which meant that every morning you were half-dead before you’d even reached the ski lift. The snowboard instructor was a Brazilian man called Marcelo, who rather than saying “I want you to” would say “Marcelo say” - like Simon Says, but considerably funnier at altitude and mildly concussed. The hotel was two stars. The food it served had absolutely no business being that good.

None of it was planned. All of it was the holiday. And I’ve been on considerably more expensive ones since that I remember considerably less.

That night in Barcelona is the piece. Because what I’ve come to understand, years later and with considerably more money than I had then, is that the three-euro lager on the plastic chair is not a consolation prize for being skint. It is the actual thing, and most of the financial decisions we make as we build wealth are, without us quite realising it, a slow and expensive campaign to make that feeling impossible.

What Arbitrage Actually Is

In investing, arbitrage is the practice of exploiting a price difference between two markets - buying an asset cheap in one place and selling it expensive in another, pocketing the spread. It appears in obvious places: if a company announces it’s being acquired at 120p per share but the stock trades at 114p, that gap exists because no acquisition is 100% guaranteed to complete. If you’re comfortable with the risk it falls through, you buy at 114p and wait for the deal to close. That six-penny spread is the market’s assessment of the probability it doesn’t. In truly efficient markets, arbitrage windows close almost instantly because everyone floods in and the gap disappears.

The same thing happens to happiness, on roughly the same timeline.

The Hedonic Spread

When you have very little money, the gap between what you have and what a small treat costs is enormous, and your brain prices a three-euro lager in Spain correctly - as a genuine pleasure, a meaningful proportion of your daily budget that justifies real appreciation. The arbitrage is enormous and the return extraordinary. What nobody warns you about is what happens as you build wealth. The beer costs the same, but it now represents a rounding error in your daily finances, and your brain adjusts its pricing accordingly. The arbitrage window closes, and you start needing a more expensive experience to generate the same emotional return. This is not a moral failing, it’s hedonic adaptation, and it is as reliable as compound interest.

The Friction Removal Business

At some point in the accumulation of wealth, you start paying for what the industry calls friction removal. Business class removes the friction of a long-haul flight. The four or five-star resort removes the friction of navigating somewhere unfamiliar, the curated experience removes the friction of not knowing what to do next. Friction removal is genuinely pleasant - the flat bed is more comfortable than the middle seat, the quiet pool more relaxing than the crowded one. This is not fake. But there is a hidden tax, and it is more expensive than it looks on the invoice.

When you remove all the friction, you also remove all the randomness, and randomness is where memories are manufactured. The people who went travelling in their twenties on a shoestring - missing connections, ending up somewhere unplanned, eating whatever was cheapest - are still telling those stories decades later, long after considerably more expensive holidays have blurred into a vague impression of nice pools. The chaos was the point. The closed road became Barcelona.

The Diminishing Returns

The investment industry sells you a dream it calls freedom, and it is not entirely wrong - financial independence genuinely removes certain anxieties and allows choices that scarcity forecloses. Building wealth matters, and this is not an argument against any of that. But the industry’s version of freedom is framed entirely in terms of what you can buy, quietly skipping over what you might lose in the buying of it. There is a number - different for everyone, impossible to calculate in advance - where additional spending stops generating additional happiness and starts generating additional complexity instead. Another standard to maintain, another baseline that yesterday’s luxury has become, requiring a new luxury to exceed it. The hedonic treadmill does not care how fast you run.

The Actual Arbitrage

Here is what nobody in wealth management will tell you, because it makes their product sound less necessary: the ultimate financial arbitrage is not buying the expensive experience, it’s training yourself to genuinely enjoy the cheap one.

If you can sit on a plastic chair in the sun with a three-euro beer and feel, in your actual body rather than as a philosophical exercise, that this is a brilliant afternoon - you have achieved something no amount of four-star hotel points can buy. You have kept the arbitrage window open, maintained the gap between what things cost and what they feel like, which is the only gap that produces real returns in the happiness economy.

The wealthy person who requires a five-star wrapper to feel comfortable has not won the money game. They have raised their cost of capital to stay content, and every year that passes the maintenance costs increase, the marginal return on additional spending falls, and the plastic chair feeling - which was free - becomes harder to access because their life has systematically optimised it away. Being rich enough to buy the luxury but genuinely preferring the cheap version - not as performance, not as affectation, but as a real felt preference - is the rarest and most valuable financial position there is.

What This Has To Do With Investing

The same logic applies to your portfolio more directly than you might think. The investors who tend to do best over long periods are not chasing the most sophisticated strategies or the most curated financial experience - they are overwhelmingly the ones who kept it simple. Broad, low-cost index funds, long time horizons, minimal interference. The plastic chair version of investing, held with the same uncomplicated appreciation as a three-euro lager on an unexpected Tuesday night in Barcelona.

The financial industry sells friction removal too: more products, more complexity, more advice about the advice, all with the same hidden tax - the removal of the simplicity that, left alone, tends to produce the best outcomes.

The arbitrage is still there, exactly where it always was. The question is whether you can resist the pressure to close it.

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What the Hell Is the Pratfall Effect?

The Pratfall Effect comes from a 1966 psychology experiment by Elliot Aronson. He had people listen to recordings of quiz contestants answering questions. Some contestants were brilliant and got nearly everything right. Others were average. But here’s where it gets interesting - at the end of some recordings, there was the sound of the contestant spilling coffee all over themselves.

You’d think the mistake would make people like the brilliant contestants less, right? Wrong. The coffee-spilling genius became more likeable than the perfect one. The small cock-up made them seem more human, more relatable, more approachable. People warmed to them precisely because they’d had a pratfall - a clumsy mistake.

But here’s the crucial bit that everyone forgets: this only worked for the high-performing contestants. When the average performers spilled their coffee, people liked them less. The pratfall humanised competence, but it just confirmed incompetence.

In investing terms, this means your brain is primed to give high-quality companies a pass when they stumble, which is fine. But it also means you’ll sometimes mistake any old cock-up for an endearing pratfall, giving chances to companies that absolutely don’t deserve them.

How This Bollocks Up Your Portfolio

Your brain treats company missteps like that coffee spill - as charming little humanising moments rather than warning signs. When a company you fancy has a bad quarter, your first instinct isn’t “Oh no, this might be serious.” It’s “Ah, bless, they’re only human. Time to buy the dip while everyone else overreacts.”

This would be fine if you were actually good at distinguishing between temporary hiccups and fundamental problems. Spoiler alert: you’re not. Nobody is, really, but your brain’s especially rubbish at it because the Pratfall Effect makes you want to see pratfalls everywhere. Every earnings miss becomes a “minor stumble.” Every product recall becomes a “slight misstep.” Every accounting irregularity becomes a “honest mistake.”

You’ve basically become the mate who keeps dating absolute wrong’uns because “they’re just misunderstood” or “everyone deserves a second chance.” Meanwhile, your portfolio is full of companies that have had more “second chances” than Cristian Romero has had yellow cards.

The Halo Effect’s Dangerous Cousin

The Pratfall Effect works overtime when combined with the halo effect - that’s when one positive trait makes you think everything about something is good. You love a company’s product, so you assume management’s brilliant, the financials are sound, and any problems are just temporary blips.

When your halo-ed company cocks up, the Pratfall Effect kicks in and makes them even more endearing. “See? Even the brilliant ones make mistakes!” You’re not seeing a warning sign - you’re seeing confirmation that they’re human, relatable, and therefore trustworthy. Apple had some dodgy labour practices? Makes them seem more real. Tesla missed production targets again? Just Elon being Elon, the loveable scamp.

The really insidious bit is that you’ll defend these companies more vigorously after they’ve stumbled than before. You’ve seen them be vulnerable, make mistakes, and you’ve decided to stick with them. That makes you feel loyal, perspicacious, like you can see past surface-level problems to the quality underneath. Meanwhile, you’re ignoring genuine warning signs because your brain thinks this is a cute little stumble rather than a red flag big enough to be used as a burial shroud for your investing dignity.

Giving Second Chances to Serial Offenders

Here’s where the Pratfall Effect becomes properly expensive. Your brain doesn’t have a good counter for how many pratfalls are too many. In Aronson’s experiment, there was one coffee spill. One. But in your portfolio, you’ll watch a company stumble repeatedly while your brain keeps filing each incident under “endearing mistake” rather than “consistent pattern of incompetence.”

The company misses earnings guidance - that’s a pratfall, quite human, you hold. They do it again next quarter - well, twice is still just bad luck, isn’t it? Third quarter in a row - okay, they’re clearly struggling a bit, but at least they’re honest about it, and honesty is endearing, right? Fourth time - look, they’re due for a turnaround, and you’ve stuck with them this long, it would be daft to sell now.

What you’ve failed to notice is that you’re not watching a competent company have an off day. You’re watching an incompetent company do what incompetent companies do: consistently underperform. But because each individual incident triggers your Pratfall Effect response, you never step back to see the pattern. It’s like thinking your mate’s a lightweight because they can’t hold their drink, when actually they’re just an alcoholic.

The Apology That Makes It Worse

Companies have absolutely cottoned on to the Pratfall Effect, even if they don’t call it that. Watch what happens when a company messes up now. They don’t just fix the problem quietly - they make a big song and dance about it. Heartfelt apologies from the CEO, town halls about “lessons learned,” carefully crafted statements about how they’re “disappointed in themselves” and “committed to doing better.”

And it works. Your brain eats it up. “See? They acknowledge they made a mistake. That’s so refreshing! Most companies would just deny it or make excuses.” You’re not analysing whether they’ve actually fixed the underlying problem or whether this is just PR theatre. You’re just pleased they said sorry, and now you like them even more.

This is the Pratfall Effect weaponised as corporate strategy. Make a mistake, apologise handsomely, watch your customers and investors become more loyal than they were before. It’s brilliant, really, unless you’re the mug holding the shares while they “learn lessons” their way to mediocrity.

How to Stop Being a Soft Touch

The fix requires you to be a bit more cynical and a lot less forgiving than your brain wants you to be. It’s not about being harsh - it’s about being appropriately sceptical when companies cock up.

Start by tracking patterns instead of individual incidents. One bad quarter might be a pratfall. Three bad quarters is a trend. Keep a written record of company missteps - not to nurse grudges, but because your brain will forget the pattern if you don’t document it. When you see it written down - “Missed guidance Q1, Q2, Q3, Q4”—it’s much harder to dismiss each one as an endearing one-off. Ask yourself whether this company was actually high-performing before the stumble, because remember, the Pratfall Effect only works for competent people. If they were already mediocre, this isn’t a humanising moment, it’s just confirmation they’re not very good.

When a company apologises or puts out a heartfelt statement, completely ignore it. I’m serious. Don’t read the apology. Don’t watch the CEO’s contrite interview. These are designed to trigger your Pratfall Effect response, and they’re extremely good at it. Focus exclusively on what they’re doing to fix the problem, not how they feel about having caused it. Their feelings are irrelevant. Their actions are what matter. Set concrete limits for how many “pratfalls” you’ll tolerate before you admit there’s a pattern. Two earnings misses? Fine. Three? You’re re-evaluating. Four? You’re out, no matter how much you like the company or how sincere their latest apology sounds.

Most importantly, remember that companies aren’t your mates down the pub. They’re not endearing when they stumble - they’re just underperforming. You don’t owe them loyalty, second chances, or the benefit of the doubt. They owe you returns. If they’re not delivering, it doesn’t matter how charmingly they cock up.

The Bottom Line

The Pratfall Effect is brilliant for making friends and humanising celebrities. It’s absolute poison for investing decisions. Every time your brain sees a company stumble and thinks “Aw, bless,” you need to override that response and think “Is this a pattern?” instead.

Companies that are genuinely excellent can survive the odd misstep - that’s not the problem. The problem is when you mistake consistent underperformance for a series of endearing pratfalls. When you give serial offenders the benefit of the doubt because each individual cock-up seems forgivable. When you’re more impressed by a heartfelt apology than by actual corrective action.

Your portfolio shouldn’t be a rehabilitation centre for companies that keep stumbling. It should be a collection of businesses that, when they do occasionally slip up, have both the competence to fix it and the track record to prove they deserve your continued confidence.

So the next time a company in your portfolio has a pratfall, by all means acknowledge it. But don’t let it make you like them more. Don’t let it cloud your judgement. And for God’s sake, don’t give them a fifth chance just because they said sorry really nicely.

Because unlike Aronson’s quiz contestants, your investments don’t become more attractive when they spill their coffee. They just become messier, stickier, and harder to clean up.

And unlike that one-off coffee spill in the experiment, your companies might just keep spilling, over and over, while you sit there thinking each one makes them more endearing. At some point, you need to accept they’re just clumsy - or worse, that they’re doing it on purpose because they’ve worked out you’re a soft touch.