North American Contrarian

Telling it like it is… in North America

Leave a comment

A Life Changing Concept from A Terrifically Boring Book… aka The Black Swan

Some time ago, I slogged my way through the book “The Black Swan” by Nassim Taleb.  It is a best-seller described as “prophetic”, “a black swanmasterpiece” and “changed my view of the world”.

Per the title of this blog post, you might guess that I found reading this book like a root canal without Novocain.  It’s the kind of book intellectual minded people hang on their bookshelves to use words like “erudite” in describing their reading habits.

That said, there was a brilliant concept in this book, one that I want to share (and hopefully save the good people of blog-land hours of torment reading the book in its entirety.)

Happy TurkeyThe concept was first introduced by Bertran Russell and is philosophically known as “The Problem of Induction” (sometimes referred to as “Hume’s Problem”) and it’s a human foible that impacts everything from economics to politics to why you are always broke.

Here it is, as described brilliantly in the book.

You are a turkey.  You live a glorious life, dining on the best turkey food (what the hell to turkeys eat anyway?).  Every day is a joy, and has been so since the day of your birth.  There are lots of chickens around for you meet, no limit set on your cockadoodling and careful care is maintained to make sure you are always in top form.

But there’s a problem, and it strikes at precisely 12 PM on October 12.  That, you see, is the day before Thanksgivingthanksgiving, which tends to be an unkind one for turkeys.  In the afternoon you are taken into the barn where your neck snapped and in an instant you sit lifeless, tagged for sale in the grocery store poultry isle.  Your life was an illusion and you never noticed that each glorious day was another slow  step towards this inevitable point of calamity.

So what does this have to do with anything except for Butterball sales?

Consider the case of the Jews in 1930’s, when Germany was on a steady arc towards enlightenment and life was gradually, but definitively becoming only better.  Consider your stock portfolio in 2007, which for almost a decade brought only gains. Or how each successive year you move up the company hierarchy and your salary incrementally follows.

The point is that we often base our current thinking on what has happened in the past.  But the past is often deceptive and sometimes- even often- does not indicate what is to come.  In fact, history is defined by surprises that completely alter the trajectory of everything that came before.

I love this concept… and not only because it fits so nicely with a blog that focusses on contrarian-ness.   The turkey metaphor has had a huge influence on my life.

It was the clincher as to why I got an MBA.  I realized that, although my career was going ok, this was not an indication that it would always continue to be ok and a broader education would buffer against any nasty surprises.   It’s why, even when stocks are on a great run, I still keep to a 30/70 bond to equities mix.  Hell, it’s even why I randomly pick up flowers for my wife on the way home from work.  You simply never know what tomorrow will bring.

Of course, the book delves much deeper into this concept and introduces the reasons as to why we are so prone to this problem.  For those who care to read on, my top three are:

  • Patterns: we want to believe that we have found a pattern when in fact things are much more likely to be random occurrences.
  • We believe almost solely what we see: to the point that we fail to recognize the wider realities outside our field of view.
  • We tunnel– that is, we focus on well-defined sources and ignore alternative ones, or those that fall outside of our own belief systems.

So that’s it.  Don’t bother reading the book, it’s a slog.  But next time you sit down for a turkey feast consider that if you aren’t preparing for the unknown around the corner, you, too, might end up seasoned with delectable cranberry sauce on a Thanksgiving plate.


Leave a comment

The Ultimate, Life Changing Financial Advice

Of all of the financial advice I have read, one piece stands out as the most meaningful.  It’s a one word goal that is deceptive in its simplicity and it changed my life.



For me, starting to save was one of my greatest achievements of the past decade.  The first time I posted a surplus was an incredibly liberating feeling.  Suddenly credit card companies, bill collectors and collection agencies had no reason to call.  It was as though a constant (albeit politically incorrect) game of cowboys and Indians had suddenly ended, the chase was called off and I was free to go my own way.

Similar to exercise routines, or remembering to call grandma every week, the toughest thing about the whole procedure was the first time.  It required change and people, including myself, are loathe to make change.

What surprised me- and despite what I had thought, the act of saving soon became enjoyable in its own right.  It’s noScreenHunter_02-Apr.-12-20.59t the immediate joy I get when the alarm accidentally goes off during the weekend or leftover pizza appears in the fridge after a night at the pub.  Instead, it’s a plodding, long term deal.  It’s more the feeling I get after a good workout or when I happily noticed that 2% milk suddenly tasted like a viscous goo after switching to 1%.  These are good things, that will make me a better person in the long run.

The sad thing is that, in our quest for immediate gratification these pleasures are too easy to overlook.  This is why only 24% of eligible Canadians file an RRSP and we only currently stash away a pathetic 3.9% of our incomes.

Experts often recommend that money be automatically withdrawn from our paycheques to savings, a sort of trickery that forces us to contribute once a month.  And that does work.  But in my humble opinion it also robs us of our greatest weapon to really invest in investing.

url-1My technique is to very consciously and methodically decide how much goes in my account each month.  This is because I actually get off seeing my bank account swell and look forward to helping it along.  I don’t have a specific amount I plan to stash away each month because my strategy is to live as frugally as possible and dump the rest into index funds and ETF’s.

But I’m getting ahead of myself here.  Before you begin to save, you are taxi driver with no petrol or a hockey player living in the deep Congo.

It all starts with a very small, though not necessarily intuitive step.  This is, to use an old cliche, to put a few cookies from the jar just out of reach.  To portion even a minuscule amount of your paycheque away from the incredible diversions of modern society towards your greater good.

In short, to begin, you must first follow my best advice.  You must start.

Leave a comment

I lost BIG in stocks… And Feel Extremely Lucky

Looking back, my foray into the stock market was a sad venture.  About two years ago, I opened an account with the online broker ImageQuestrade.  I had watched various stocks for a few weeks and, over that period, they mostly ticked up a few points.

I was a big fan of Apple products, and noticed that the stock had moved higher.  I recall that one day the stock opened at around $500 and by end of day was up at around $550.  I did the math: if I dumped my savings, around $10,000 into Apple stock, I would have owned 20 shares.  20 shares, with a $50 gain, and I would have $1000.  How had I missed this easy money?

One day at work, I decided to take the plunge and bought 10 shares at around $600.  It was an exciting Imagefeeling, especially when, on cue, the stock started to rise.  I started watching Apple stock obsessively.  At work, I kept Questrade secretly hidden beneath spreadsheets and reports.  I felt like I’d discovered a secret income generator- and it was so easy!  Soon the stock had reached close to $680.  I had made almost $1,300 without leaving my chair, in just over a month.

In the summer, 2012, Apple released some negative numbers. The new IPhone had not met analysts predictions.  The stock, which had now reached almost $700 tumbled and within a couple of days it was at $550.  All of my gains were gone, all of the time that I spend watching the numbers, wasted.  My easy profits had turned into a loss of over $1000.  I panicked.  It seemed a foregone conclusion: Apple was doomed.  I sold my stock, and felt awful- sort of like guilt and despair rolled into one.

That would be the end of the story, had I not checked Apple stock a couple of months later.  While the stock had not reached its previous peaks, it had climbed back up.  Had I waited, I would have at least broke even.  I vowed that next time I went into the stock market, I would only do so after I was more educated.  I promised myself I would read three books on investing before I bought a single other stock..

I read:

I can’t overstate the importance of these books.  I won’t summarize them, or give financial advice, as you can read them for yourself.  But what I will say is that my Apple strategy was not investing.  It was gambling.  The key point made brilliantly in the above books is that you can’t “time” the market.  You can make money in stocks, but the way to do so is through careful investments in a diverse portfolio, and giving it as much time as possible.  In short, doing everything I failed to do in my venture with Apple.

Since then, I have a lot more invested in the market and so far I have strong earnings.  I only sell after careful consideration, and never let emotions dictate anything.

Strange as it sounds that lost $1,000 was the a best investment of my financial career.