HAIC | Investment Philosophy
Human action investment club, entrepreneurship, ventures, investment club, human action,
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Investment Philosophy

HAIC’s Principles

First and foremost, act on principles, not on pragmatism

  • In many circles, pragmatism is praised and highly esteemed. It is said to be the most important characteristic of the successful man. However, means justifying the ends is no guide to action, no ethical framework, no path to a bountiful life. It simply is an empty excuse for those who decide to act without the guidance of principles.
  • The pragmatic man is marked by either a myopic or a hyper-focused view. When incapable of seeing beyond today, the short term is all that matters. When worried about tomorrow, his vision is trapped inside a telescope and seeing anything else becomes an impossibility.
  • In short, pragmatism is Machiavelli 2.0 – it is the rebranded term of a bad thing.
  • By definition, the successful life has nothing to do with pragmatism, but the opposite. To succeed in any part of our lives is to pursue and to achieve ethical ends in ethical ways. In other words, it is the journey and the destination together, not only one nor the other.
  • Also, guiding life on principles gives an added benefit to the acting man. A depth of field vision not available to the pragmatic. With that kind of wide and deep vision, the ethical man is able to enjoy, to discover and to create an endless ocean of opportunities.
  • To end, this kind of vision is one of the most important characteristics of the successful entrepreneurs and investors.

Even when enthusiasm fails, act like an enthusiast

  • The last two lines of the Invictus poem by the English poet William Ernest Henley do not talk directly about enthusiasm, but only the enthusiast would think and act this way…

 

“… I am the master of my fate

 I am the captain of my soul

Be constant, be focused

  • Any action encounters challenges that were either not forecasted or underestimated. Every single aspect of life goes like that, and the acting man cannot let the first unexpected hurdles shift his focus nor stop his journey.
  • Venturing into the future goes far beyond the planning stage. The acting man must execute his plans, and for that to happen, the constancy of his focused efforts is of the uttermost importance.

Be aware of the surroundings. Be international

  • Speak different languages, visit many countries and experience cultures that are foreign to you.
  • We are not plants, flowers or trees. We are not grounded to one sole place, to one sole environment, to one sole situation.

Be critic of yourself

  • When you err, and you will inevitably err, recognize the error, keep it in mind and do not repeat it.
  • It is important to guide your entrepreneurial and investing actions this way, but even more crucial is to act like that on moral and ethical issues.
  • Tu ne cede malis sed, contra audentior ito (Do not give in to evil but proceed ever more boldly against it) – L. von Mises’ Motto (from Virgil);

Equilibrium in the many layers of our lives

  • Entrepreneurial Investment Opportunities and knowledge arise from every aspect of our lives. Ideas and creativity are boosted by a diversity of settings and experiences.

The Successful Investor

Understand that every investment, like every action is based on individual and unique assessments of the future

“There is no such thing as a nonspeculative investment. In a changing economy action always involves speculation. Investments may be good or bad, but they are always speculative…”

Ludwig von Mises

Should not be afraid of saying NO to an investment. Agility and simplicity are crucial. Quickly deciding on whether or not taking the next step is of the utmost importance

  • Should not simply follow the heard. The investment should be well understood by the investor himself, if not, he should let it go!

While making his own decisions, the Investor should not live in the bubble of his own thoughts

  • Communicating and sharing ideas with other Investors and Entrepreneurs is always a crucial part of this continuous learning process.

When striking private deals, the Investor should be more concerned with the impact of the Capital Structure on the invested venture than with the Valuation itself

  • Price and Valuation are undoubtedly important factors, but they are not everything.
  • Macro and Micro Trends also play a vital role in this analysis.

The investor should not be passive! Should search and create opportunities. Should be involved with the investments, but be aware of his limits, roles and deficiencies

  • When involved in private ventures, the investor has to be aware that he is not a manager involved with the daily activities of a firm, but someone capable of mentoring and assisting the leader entrepreneur in areas he lacks expertise.

An investor should always, always be aware of his role with a venture, with an investment, and the relation it has with his personal life

  • being a good entrepreneur, a great business man running and leading a company is a completely different thing than being a successful minority investor with no managerial and leadership involvement.
  • Sometimes, great entrepreneurial investments simply do not fit with one’s personal life, or with one’s already existing portfolio of assets and liabilities.

Entrepreneurship as the driving force of the market

HAIC puts the entrepreneurial action at the center of its investment decisions. It sees entrepreneurship as the heart and soul of society. It understands the entrepreneur, the leading actor of the market process, as the one who bears the uncertainty of the future and dares to endeavor to supply to the needs and wants of today and tomorrow.

With that in mind, HAIC always gives the acting man the highest importance in its analyses. When studying a venture, its leading people are at the top of HAIC’s inquiries, and when looking at the economic environment, it is the entrepreneur again who draws HAIC’s attention.

In other words, for HAIC, the creative entrepreneur leads a business, not the homo economicus of the textbooks. It is people prone to errors and success who shape the world, not the equation maximizer automatons of mainstream finance and economics.

     “… entrepreneurship is the force which unites society and permits its harmonious advancement, since it also tends to coordinate maladjustments this process of advancement inevitably brings forth”

Jesus Huerta de Soto

“Firms exist to be a tool the Entrepreneur, acting in and shaping the ever-changing world, uses to deal with uncertainty, costs and all the problems that arise in coordinating, creating, discovering and funding all the resources and knowledge needed to obtain Gains through the process of offering increased satisfaction to consumers”

HAIC’s CIO, SAlberich

Capital Structure as an integral foundation for Success

The Capital Structure is an often neglected aspect of businesses planning and analysis. Frequently, entrepreneurs and financiers too eager to start their projects ignore or downplay the role the Structure of Control plays on the success of their ventures.

In a successful venture, three aspects have to be aligned. First, the firm has to be guided by a correct forecast of the market demands. Second, it has to adequately combine the factors of production necessary to bring forth the wanted product. Third, it has to be financed and led by a Capital Structure suited to its needs.

This alignment takes place in an ever-changing world that demands constant reevaluation of forecasts and recombination of the factors of production. It is not a one shot solution determined at the beginning of the entrepreneurial project that leads a venture through a static path; it is an endless process of readjustment of plans in a dynamic setting. That said, if the Capital Structure is not aligned with the market demands and with the factors of production, this continuous rearrangement will be made harder and the survival of a firm will be in jeopardy.

HAIC understands this, and makes the Capital Structure a crucial aspect of its inquiries, studies and actions.

  • The Capital Structure, or the Structure of Control, could be summarized into two parts, the sources of finance and the control arrangements among the shareholders of a venture/firm.
  • Unappropriated Capital Structures frequently make Entrepreneurs hostages of the many hurdles and barriers put in place by inadequate financial sources and/or shareholder arrangements. Whenever that happens, promising businesses are led into fatal paths.

““The proper selection of a project’s financial source doesn’t guarantee its success, but the wrong one assures its failure”

“I constantly see good companies and projects failing, not because of the changing market or of internal deficiencies, but solely due to a poorly executed shareholders agreement”

HAIC’s CIO, SAlberich

The Business Cycle, Money Printing and Governmental Intervention

Loose monetary policies are directly responsible for the distortions brought up by the boom and bust of the business cycle. Incorporating such analysis is a vital tool for identifying Clusters of Malinvestments, entrepreneurial opportunities and setting a simple and efficient Global Investment Strategy.

Here, HAIC  leaves to the wise words of Hazlitt, Mises, Hayek and Rothbard the task of illustrating the importance of the business cycle.

“The money rate can, indeed, be kept artificially low only by continuous new injections of currency or bank credit in place of real savings. This can create the illusion of more capital just as the addition of water can create the illusion of more milk. But it is a policy of continuous inflation. It is obviously a process involving cumulative danger”

Henry Hazlitt

“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved”

Ludwig von Mises

“I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments”

F.A. Hayek

“The World is in a permanent monetary crisis, but once in a while, the crisis flares up acutely, and we noisily shift gears from one flawed monetary system to another”

Murray Rothbard