Retaining mastery is not easy…

It seems so long (1987!) since Tom Wolfe mordantly mocked the then “Masters of the Universe” in his novel “The Bonfire of the Vanities” (which in turn derived from an event that Savonarola instigated in 1497 in late Quattrocento Florence, in which objects considered sinful were burned. Ironically, he ended up burnt at the stake). Of course, Masters of the universe come and go; and the term these days would probably be considered to refer to those controlling huge pools of hedge fund or alternative capital.

Whatever their origins, these individuals seek to exploit economic, market and other discrepancies to compound wealth over time. Some opportunities last for years, if not decades, while others disappear almost as soon as they arise.

However, any Master of the Universe would have to be foolish to believe that change will not come; even as the economics on which they rely is still struggling with the fact that its models very often do not accord with reality. Even the acolytes of the dismal science cannot agree upon what exactly it is a “science” of, and which are the most appropriate models to create and use.

At least part of the problem would seem to be that, rather strangely, money itself (and, by extension, much of finance) is often largely ignored- almost as if the “Masters” hardly existed- while economic models also tend to be linear.

It is certainly arguable that in the real world the economy is quantum and indeterminate in nature (until measured), with many discontinuities.

Interestingly, some 90 years ago, Keynes himself (JMK Vol 10, p262) wrote: “…the whole is not equal to the sum of the parts, comparisons of quantity fail us, small changes produce large effects, the assumptions of a uniform and homogeneous continuum are not satisfied.” It would seem that he recognized that economies are inherently subject to discontinuities and dislocation. Bear in mind that this was stated before the onset of the Great Depression.

The situation is compounded by the fact that economic theories generated by those seen as being authoritative can become quite pervasive, particularly if they seem to benefit a powerful constituency- Neoliberalism and Monetarism being prime examples in. This can lead to them persisting, little questioned, until the onset of the next discontinuity or heterodoxy (which brings to mind The Byrds’ iconic anthem “Turn, Turn, Turn” from 1965) leads to them being overturned. As Max Planck famously said: “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

To continue to prosper, the Masters must constantly refine their business and economic models, as their environment changes. Complacency is the “kiss of death”.

At Awbury, we would in no sense regards ourselves as Masters of the Universe. Instead, we sustain and build our franchise by understanding that, while our product lines are designed to retain their value for the long term, there will always be discontinuities; and that we need to maintain our vigilance at all times in order to avoid disappearing into the proverbial black hole.

The Awbury Team


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