Financial Crisis and Surfing, Architecture, Decayed Woods, Ephemeral Smoke and Clouds

Thought 1: Financial Crisis and Surfing

Investing in stock market is like surfing. The ups and downs of the market is like the waves in surfing, fluctuation is the very nature of them. A good player needs both the upward and downward movements and knows how to play with them.

In surfing, riding on the wave top or inside (when it’s a pipe wave) is handsome, thrilling and rewarding, it is also difficult. But the most difficult and important part actually happens prior-- timing when to prop up on the surf board. It takes knowledge and judgement as well as physical strength (especially on the upper arms). Similarly, the alluring part of buying low & selling high is a result of hardwork in research, cool-headed judgement and courage to be lonely.

In both stock investing and surfing, it’s a balance of daring and caution.

In documentary surf film “Step into Liquid”, professional surfer Keala Kennelly said that the best surfer is the one having most fun. I think it’s also true in stock investing. The best stock investor is the one who understands, accepts, plays and enjoys the fluctuations. And Warren Buffet is unarguably the very person. Amazingly though, many investors only admire Buffet’s success and fortune, and do not learn from his theory, mentality and approach.

In surfing, as current wave subdues, one paddles out and positions oneself ready for the next exhilarating high. In stock market, down also means up next. It’s time to stock up the inventory for the long term, seriously.

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Thought 2: Financial Crisis and Architecture

As some Wall Street firms collapsed and others perturbed, they were criticized by many as the sole or biggest criminal for the current financial crisis.

My curiosity is about the sub-prime mortgage lending at retail level. Wall Street firms do not approve mortgage applications, they package up mortgages from retail lenders and derive various wholesale financial products from them. Sure, some underestimated the risks and probably overleveraged. But what caused the breakout of massive mortgage defaults? Is there something to refine in the mortgage approval industry?

I am not an expert on finance or investing or economics, but Wall Street firms seem to me just the top layer in an architecture. As parts of the top layer toppled, I think both the top layer and the foundation need to be examined comprehensively.

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Thought 3: Financial Crisis and Decayed Woods

The collapse of companies have shocked the world and shaken the confidence among many. Some unjustified loss of confidence has confused logical thinking among many.

Hikers often encounter decayed woods in forests on mountains, Some decayed ones used to be big towering trees, destroyed by bugs or wild fire. “What a pity!” would be a usual and immediate reaction. Often times though, this is a natural and unavoidable phenomenon. Just like not all good seeds end up towering trees, not all trees survive and thrive. And in some cases, like lodgepole pine tree, wild fire actually is needed in order for the pine needles to heat up and release seeds for the next generation’s growth.

It’s sad to see well-established firms to fall all of sudden, and even more unfortunate if one’s living is closely and directly impacted. But in the long term development of financial markets, mistakes and problems are natural like the decay in woods, they can support future generation's growth. Stay calm, focus on finding the root causes, learning the lessons, fixing and improving.

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Thought 4: Financial Crisis and Ephemeral Smoke and Clouds

In this financial crisis, I am reminded of this old article friend Echo forwarded to me months ago. It’s actually 2005 article (see below) from New York Times by Nicholas D. Kristof “From Kaifeng to New York, glory is as ephemeral as smoke and clouds”
http://www.nytimes.com/2005/05/22/opinion/22kristof.html

Kristof used poor Chinese city Kaifeng’s fall from the most prosperous city in the world in 1000 to alert New York/America not to follow suit. Kristof gave suggestions for improvement for New York city to avoid becoming Kaifeng-on-the-Hudson.

And I think both glory and crisis are as ephemeral as smoke and clouds, in perspective of long history and future of human beings.

Few country/economy/culture or city or company/brand or individual has proven to be ever-victorious. While I believe in trying one’s best as any of the entities above mentioned, I also think being replaced is not necessarily the worst thing to the development of a bigger environment. Fall of one thing often leads to or is a result of rise of another, often better.

In most career/management trainings, they teach you to strive to be indispensable. I appreciate and applaud a contrary opinion by founder of Alibaba.com Jack Ma instead. Jack Ma once said something like: if you are indispensable, you’ll never get promoted. A true leader finds and develops talents to exceed the leader himself/herself. (Notes: Not original words. My interpretation of his speech in Chinese from book “Who Knows Ma Yun”.)

Ma Yun’s management strategy essentially seeks for collective excellence while encouraging people to be dispensable. Financial crisis and its solutions also pave for a big scale and long term excellence. This is not the first financial crisis, and will perhaps not be the last. The previous crisis were ephemeral clouds and smokes already, hopefully this crisis will help strengthen future growth, and hopefully future crisis will not originate from the same problems.

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Closing?

The earlier stage of the crisis seemed to be sub-prime only and did not seem to impact our city NYC. When the crisis invaded Wall Street in our city, we got calls and emails of concerns from friends. The media also predicts that if the crisis expands and continues, almost no industry and individual can be spared.

For most people, there is no need to worry or panic. Worries and panic do not prevent or protect. Worries and panic are not insurance either, they don’t aid. On the contrary, they ruin your mood. For most people, the only thing we should and could do is to ask “Have I tried my best?” Try you best, be the best you can be, then be happy and content, and let fate decide on the rest.