TIB9: The Power of Enough

There is an old Brazilian story about a fisherman and a businessman that exemplifies the power of “enough”. I cannot take any credit for this story, so instead of doing a half-ass job trying to summarize it, here is the full story for your convenience.

The Fisherman and the Businessman

There was once a businessman who was sitting by the beach in a small Brazilian village. As he sat, he saw a Brazilian fisherman rowing a small boat towards the shore having caught quite few big fish. The businessman was impressed and asked the fisherman, “How long does it take you to catch so many fish?”

The fisherman replied, “Oh, just a short while.”

“Then why don’t you stay longer at sea and catch even more?” The businessman was astonished.

“This is enough to feed my whole family,” the fisherman said.

The businessman then asked, “So, what do you do for the rest of the day?”

The fisherman replied, “Well, I usually wake up early in the morning, go out to sea and catch a few fish, then go back and play with my kids. In the afternoon, I take a nap with my wife, and evening comes, I join my buddies in the village for a drink — we play guitar, sing and dance throughout the night.”

The businessman offered a suggestion to the fisherman. “I am a PhD in business management. I could help you to become a more successful person. From now on, you should spend more time at sea and try to catch as many fish as possible. When you have saved enough money, you could buy a bigger boat and catch even more fish. Soon you will be able to afford to buy more boats, set up your own company, your own production plant for canned food and distribution network. By then, you will have moved out of this village and to Sao Paulo, where you can set up a headquarters to manage your other branches.”

The fisherman continues, “And after that?”

The businessman laughs heartily, “After that, you can live like a king in your own house, and when the time is right, you can go public and float your shares in the stock exchange, and you will be rich.”

The fisherman asks, “And after that?”

The businessman says, “After that, you can finally retire, you can move to a house by the fishing village, wake up early in the morning, catch a few fish, then return home to play with kids, have a nice afternoon nap with your wife, and when evening comes, you can join your buddies for a drink, play the guitar, sing and dance throughout the night!”

The fisherman was puzzled, “Isn’t that what I am doing now?”

The Knowledge of “Enough”

We have talked tangentially about the power of “enough” in earlier pieces, but this is the first time that we have directly addressed how much leverage and value you can get from knowing how to define when enough is enough. I love this story because it is a perfect contrast between (i) a typical 2023 mindset that “more is better” and (ii) a simple outlook that distills life down to the essentials.

When someone talks to you about how to manage your finances, they usually lead the conversation with some math and percentages.

They might reference the 50/30/20 budgeting rule made famous by Elizabeth Warren (i.e., spend 50% on your needs, 30% on your wants, and 20% on savings).

They might point you to the 70/20/10 rule (i.e. 70% goes towards living expenses, 20% goes towards repaying any debt, or to savings if all your debt is covered, and the remaining 10% is your ‘fun bucket’).

Everyone knows the key to budgeting is arbitrarily bucketing life into percentages!

But which rule should you choose?

And based on what criteria?

It is probably good to have some idea of how much of your income you want to allocate to various things, but starting from a set of arbitrary percentages seems ass backwards to me.

The first thing all of us should focus on is getting the goalpost to stop moving. We all live in an environment where we are surrounded by people who are more successful than us, have more money than us, and have flashier lives than us.

This is how capitalism works. I love capitalism, but the feature and the bug of capitalism is that it simultaneously enables us to earn an infinite amount of money (the feature) while also making us jealous of everyone around us (the bug).

Being able to define what “enough” is will be our biggest force multiplier/point of leverage that we have in our lives. Like the story outlines, the fisherman’s ability to understand that he already had “enough” in life prevented him from blindly following a course of action that would have both (i) introduced a significant amount of risk and stress into his life and (ii) would have at BEST led him back to exactly where he started in the first place.

As we go through our careers, we will inevitably make more money. We will rise up the ranks of the corporate world, get promotions, and receive more opportunities to create more wealth for ourselves.

No matter how much money we make, we still have to define what “enough” is. Once we have done that, then we can determine what percentages to assign to the various buckets in our budgets.

Who knows, maybe we will find that we already have everything we need in life just like our Brazilian fisherman.

Recommendations from this week

Just wanted to give you all a heads up on some good stuff I have listened to this week. Hopefully you all find it useful.

For those who are a bit more advanced in their understanding of the markets

1. What the Bond Sell-Off Means for Investors

   Hidden Forces is one of my favorite podcasts. Led by host, Demetri Kofinas, this podcast discusses the interplay between the Fed and Treasury, and why the stock market hasn’t tanked the way many observers expected this year after the Fed raised interest rates as quickly as they did.

For those who are new to markets, investing and finance

1. Tim Ferriss Interview with Michael Mauboussin - How Great Investors Make Decisions, Harnessing the Wisdom (vs. Madness) of Crowds, Lessons from Race Horses, and More

   Michael Mauboussin is a bit of a cult hero for those who are interested in investing. He has written a few great books about valuation, markets and general investment principles. In this interview, Mauboussin and Ferriss discuss what we can learn from the best investors of our time and good mental models to keep in mind for all investors (both rookies and vets).

Offer for free 1-on-1 coaching

Thanks to everyone who responded to my poll a few weeks ago. I really appreciate the honest feedback. It looks like 30% of you are open to (or have a preference for) 1-on-1 coaching when it comes to learning some of these personal finance principles. In keeping with the power of 3, I am offering 3 free 30-minute 1-on-1 coaching sessions for the first 3 people who reach out saying that they are interested. In these sessions I’ll also send you the budgeting tool that I have put together (and use) myself. We will discuss how we can refine the tool to best suit your needs. Looking forward to engaging with you all! Until next week.

^{Disclaimer: Nothing contained in this website and newsletter should be understood as investment or financial advice. All investment strategies and investments involve the risk of loss. Past performance does not guarantee future results. Everything written and expressed in this newsletter is only the writer's opinion and should not be considered investment advice. Before investing in anything, know your risk profile and if needed, consult a professional. Nothing on this site should ever be considered advice, research, or an invitation to buy or sell any securities. Rohan Muralidhar is not a licensed securities dealer, broker or US Investment adviser or investment bank. This newsletter is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell or to participate in any advisory services or trading strategy.}