The most valuable commodity

Background

What could possibly be the best commodity in finance? Some would say money, relationships, natural resources or data. It can be agreed that all of these are indeed important, but what about one’s ability to effectively tie all of these things together to work in harmoniously? Let’s take a further look.

Part A
There is a famed company that is creating breakthrough innovations under the leadership of a CEO that is a creative visionary. Each product could possibly make our problematic World a better place through the intelligent technology produced by this firm. The company has a cult following, effectively forming a solid niche market comprised of loyal believers who can afford the products. Marketing through word of mouth has been extremely effective and this is what helps to hold this community together. The stock price has been trending upwards for the past 3 years and those who ‘got in’ early would have more than doubled their money.

Part B
On the other hand, the CEO is burning through cash at an unsustainable rate and has had to raise debt repeatedly in a relatively short space of time. The innovative products have bugs to work through, which take notable time to perfect. This means that patient capital is needed to facilitate the success of the company, but as we understand debt is not as patient as equity. Further, the CEO being a passionate visionary is also working on other large, capital intensive, unrelated projects that don’t produce any cash. This is with the background that none of these projects are supported by a mature, cash rich, stable parent company that could afford to finance further developments.

The problems we face in finance are underscored by a missing piece or pieces in a puzzle. When one fails to acknowledge the whole puzzle then the pieces will mean nothing. Education is the ability to connect the dots to see the bigger picture, specifically combining the factors in both part A and part B to make choices. Sometimes one can be tempted to only follow part A of the story because part B is almost never discussed by the media, the crowd or the hype but discovered through dispassionate, level headed research. When this is done, the analysis can be more clearly contextualized and meaningful. As we know, better analysis leads to better decisions which results in better returns.

Final thoughts

Education is not merely about how much a person knows but rather the depth of their understanding. Of course, access to resources is critical in gaining an advantage but when one isn’t adequately prepared for access then it could result in self sabotage. When an unprepared person gains a fortune, it disappears in a flash and similarly business relationships can be squandered as easily for the same reason. Education prepares us for the resources that will create success because we can than take these resources as ingredients. Education makes one into a chef which can take these ingredients and create a dish that is nutritious and tasty which in our World means consistently better quality returns for our clients.

By Julian Morrison

Julian is an Investment Advisor at the JMMB Group with experience in Insurance, Banking and Economics. He holds a Wealth Management and Financial planning certificate and another in Mergers and Acquisitions from the Jamaica Stock Exchange. Julian is also a member of the Jamaica Chamber of Commerce and takes a special interest in the development of Micro, Small and Medium Sized Enterprises (MSMEs) in the Caribbean.