道天地將法
孫子兵法 has been truly prominent through 2022 and we shall use it to understand the underlying principles of 道天地將法
天
The most prominent factor that ravaged the entire 2022.
We can see why 天 is second in line just behind 道. When macro factors come into play, almost nothing else matters. It was the same with covid, it was the same with the Fed’s interest environment, inflation and it will be the same moving forward. 順天者昌、逆天者亡. From “Growth Stocks”, to banks, to oil corporations, all did pretty much the same as 2021 (effort wise), but their change in valuation is drastically different.
Again, it is easy with hindsight to be able to see where’s the peak and where’s the trough. More importantly, it will be the commensurate effort in measuring and understanding the cascading effects of any macro factors, the extend of it and the duration of it.
Understanding and undertaking the appropriate risk returns will be the key to better manoeuvre such environments again.
地
The fundamentals of the business, its moat, business model, books health and simply internal capabilities, strength and advantages or disadvantages.
One of the clear outcomes of 2022 is that matching 地 with 天 produces incredible results.
A fortress built on a hilltop coupled with blazing sun during noon has an almost unstoppable downward attack momentum.
An army of well-equipped well-trained archers are pretty useless when the wind is against them and should only wait for the wind to turn.
Understanding 地 is critical to understanding how one’s strengths or weaknesses is able to perform against the current macro climate. And along with it, the risk and reward arising from the short and long-term valuation difference created by market forces.
將
The one that can make or break the entire business and perhaps one of the hardest to assess.
As previously discussed, I believe there are generally two different scenarios on management. 1. Where the business is absolutely reliant on it (mainly startup phase) and 2. Where the business can totally do without it.
The wisdom of Buffet and Munger would also tell us that it is best to be invested in businesses that can perform well independent of who is running it.
This is the ultimate truth as businesses are perpetual entities and should be seen as an entity by itself rather than an extension of the person that is running it.
The Elon Musk saga perfectly narrates the 將 factor in this particular case.
Nevertheless, it does not mean to ignore or disregard the 將 factor, but rather to understand it. What risk and reward does this 將 brings to the business during their charge.
And finally on the topic of 調兵遣將.
Understanding the business deeply and the effects of 將 on the business allows us to uncover risks and rewards in management changes. 遣將.
千里馬遇伯樂
The right management with the right business can add incredible value or can drag the whole team down.
Steve Jobs founding Apple.
Steve Jobs getting kicked by Apple.
Steve Jobs coming back to head Apple.
Steve Jobs handing over to Tim Cook.
In my opinion, the above 4 situations are all positive decisions, especially when Steve Jobs was being kicked. If he had not, I believe he would run Apple down to the grounds at that time.
霸王不過江 焉能捲土重來
Nonetheless, management changes always come with high short-term volatility where previous structures are torn down and new ones to be painfully rebuilt.
法
As we can see, under the influence of all the previous factors, it is tough and generally slow for any 法 to significantly impact the state of the business in the short run.
Strategies takes time to implement and execute, culture takes time to inculcate. However, getting the ball rolling is important as well, especially in the right direction.
What we can do is to keenly observe the strategies and operations to understanding the risks and rewards of the strategies and derive the difference between the short-term and long-term position of the business.
道
And finally, 道.
The most important/special intangible factor that can make or break everything else.
To say that it holds the priority or is the top factor in 道天地將法 would be slightly inaccurate.
Instead, I would say it is closer to a trump/ joker card. A special “out of factor” factor.
Mission, Reason, Calling, the Why, the Way, whatever you call it, divine or mortal.
道，可道，非常道。名，可名，非常名。
It is similar to what is written in our articles’ disclaimer, that words used are mere words, as if and where philosophies can be conveyed without using written letters, we would do so. Or the likes of Bruce Lee’s Jeet Kune Do philosophy where Jeet Kune Do is not Jeet Kune Do, it is not a system, it is but a philosophy.
We see that 道 can seemingly perform miracles and go against all odds regardless of the situation. And at the same time, it can destroy everything once it is lost.
It is perhaps simply the basis of the start of something or nothing.
From this 道, we had witnessed the miraculous uprising of Tesla from its inevitable demise from 2018 – 2019 and the fall from grace from 2022.
It would probably be beyond human to fully assess this factor accurately but perhaps to be appreciated and risk adjusted for our own objectives.
It succeed because it succeed. It fail because it fail.
There is no why and it isn’t due to a choice. It is because it is.