Ever since my kid was a baby, he had rather erratic sleeping habits. We did not insist on a standard bedtime for him every evening, neither did we dictate that he had to nap at specific times in the day.
As parents, we ourselves did not believe in routine. By not having a schedule, we wanted him to be able to sleep anywhere and everywhere. We wanted him to be flexible and adaptable.
It made for great traveling. He would be unfazed by the time changes as we bought him gallivanting around the world. He would fall asleep whenever he became tired, with nary a care of where he was or whether it was even his bedtime.
It also made for a somewhat ‘fun’ parenting. On the back of our minds every day lies the perpetual questions – Has he been stimulated enough mentally today? Is he physically challenged enough today? Is he tired enough to fall asleep soon?
The more we engage him during the day with fun activities, the more likely he is to fall asleep at night promptly, giving us precious time to ourselves.
It was an awesome arrangement. He gets his fun in the day and we get our time at night. If we got lazy (or busy) and kept him at home throughout, he ended up wide awake in the evenings and would insist on playing till late. If we made effort to spend quality time and had bought him out for a bike ride/playground/bouncy castle/science centre/play date/trampoline park etc etc, he ends up sleeping earlier in the evening.
We were pretty happy with this setup – kid and parents alike.
Negotiating with a Terrorist
As he got older and was able to express himself better, the situation changed somewhat.
Tired or not, our little friend is always looking to squeeze more mileage out of his day. He would insist on playing for just a little while more after dinner. He would fight sleep by singing loudly to himself and acting hyper.
The act of getting him to keep his toys required a negotiation. Washing up and changing into PJs warrants another discussion. He would make demands and push his luck. His favourite word is ‘No’. On good days it was just verbal sparring. On others we might well be negotiating with a terrorist.
And precisely because we set up the system such that there is no routine, every evening becomes a challenge. Often it would take up to two hours of to-ing and fro-ing before he is tucked into bed. It was extremely demanding.
Just the other day I was chatting with a colleague. He had a kid around three years old, just about the same age as mine. After dinner they would have half hour of play time. Strictly after, it would be off to bed. The kid would be given a choice of a bedtime story and then it is lights out and eyes shut. The routine is well established and the entire process barely required half an hour of my colleague’s time every evening.
It was then that I understood the rewards of having a system in place.
Investing System A and B
Imagine retail investor A. Investor A works hard in his job, lives prudently and looks to invest his savings to grow his wealth. He is always on the lookout for investments that will generate good returns. Over the years he has dabbled in forex, bought some commodities, invested in a property with some friends. Most of the time however, he is investing in the stock market.
Every time he comes across a new stock investment option, he will evaluate them on their own merits. But because he does not have a system for evaluating his investments, he now not only needs to evaluate the investments, he also needs to determine the criteria used for evaluating the investments.
This presents two problems. First, the criteria changes. As human beings we are subject to biases. If we do not have a hardwired set of criteria and strict buy-sell rules to select our stocks, the moment someone comes along with a sexy stock tip and ‘sure win’ recommendation, we WILL amend our criteria to fit the stock in.
Second, it is extremely taxing. Evaluating investment options can be tough enough. It is even tougher when we have no firm grounds to base our reasoning on and have to seek new grounds on every case we come across. As retail investors, the time spent could be put to better use.
Imagine investor B. There is a clear cut set of rules he abides with. He selects stocks based on this set of criteria. Any stock that falls within the criteria he will investigate further. Any stock that falls beyond this set of rules he disregards, no matter how compelling the story is. It does not matter if the stocks he misses eventually becomes a roaring success.
Investor B is resolute because he is confident that sticking to his process will yield him very good returns over the years – much more than picking stocks based on tips can possibly yield him. He is confident because he determines the set of rules himself.
He does not have to waddle around looking for reasons to buy or not to buy a particular stock. He does not have to convince himself of anything. The process is fast and painless.
At this juncture I want to state that both Type A and B investing will work just as well. Global macro investors like George Soros thrive on the System A form of investing while Warren Buffett and Walter Schloss are great examples of successful System B investors.
Parenting and Investing
Parenting and Investing are extremely similar activities. Kids are just like our investments (literally and figuratively). How we approach them will determine how they will turn out. Both of them do not come with instructional manuals.
We want the best for them but yet the eventual outcome is seldom within our control. I can draw many more parallels and I am sure as a parent-investor yourself, you are able to as well.
As parents my wife and I have gone for System A from the very beginning. Our lack of a stable system has led us to having to evaluate each negotiation on its own. We do not have a set of preset rules to fall back on. We end up being ‘somewhat’ overwhelmed each day. As I write, we are in serious discussion to set up a proper bedtime regime. I have high hopes that we will be able to incorporate B elements into our parenting.
Dive, snowboard and have moved house five times in the last ten years. Miraculously filled up every single page in my passport before it expired. Manage risk for a living.