The easiest 200k you'll ever make

Also, how do we navigate important life decisions?

Hi guys,

Hope you are doing well. I’m okay, Alhamdulillah.

A few weeks ago, I noticed something interesting. The pound-dollar exchange rate was at 1.41. Why was this interesting?

** Side note: I know very very very little about finance x economics. Please do not take my random thoughts as financial advice.

You see, over the last two decades, the pound has slowly weakened against the dollar. From a macroeconomic perspective, the US has done (and will likely continue to do) better than the UK. As such, my understanding was that the demand for the dollar will continue to increase relative to the demand for the pound and the trend we saw would go on.

But sometime in February, I read a news article about the pound strengthening relative to the dollar. It had risen to 1.41 when it had been 1.37 just two weeks earlier. Curious about why that was, I did some basic research.

It turns out that UK's vaccination drive was moving much faster than similar efforts in the US, and traders were betting that the UK economy would open up faster (and thus be more attractive) than the US over the coming months.

Pause.

So the UK's currency was going up in the short-term. I then decided to look at long-term trends. Two quick Google searches told me that the British economy contracted by 9.9% in 2020 while the American economy shrank by 3.5%. Coupled with the future impact of Brexit on the UK's economy, my guess was that the strengthening we saw was short-term and the pound would ultimately underperform the dollar.

So what then?

Seeing as I currently do not actively earn in pounds or dollars, none of this should be my business. 😂

But my reasoning was that if anybody had a lot of pounds they were not using, they should epp my laive. 😭😭

Okay, that was not my reasoning. 😂😂

My reasoning was that anybody with an appetite for risk and a pile of pounds in savings should convert to dollars at a high exchange (1.41), hold dollars for a few weeks or months, and then convert back to pounds when things return to normal (1.37 ish or less - it was 1.23 this time last year).

Let's do the math.

If you had £10,000 in your savings account and converted it to dollars on the 22nd of February, you would have received $14,100. If you had waited a few weeks (assuming the rate returned to 1.37) and converted back to pounds, you would have £10,292.

At the black market rates, £1 = ₦675 and £292 = ₦197,100.

As far as I was concerned, this was the easiest 200k anybody would ever make.

** Side note: This is why people say it takes money to make money. More times than not, the people able to bear the risk of such trades (or even investments like a commercial pilot license, attending business school, or funding the next FlutterWave) are people who have some level of financial comfort.

So I reached out to a friend who I believed was in a financial situation comfortable enough to test this hypothesis.

But something else happened. While he agreed 100% with the logic and reasoning, he did not do the trade. Frankly, it just wasn’t a priority for him.

I realized I had been thinking like a Nigerian. I have no serious attachment to the pound as it was just another random investment vehicle - just something to use to make 200k.

But for him, the situation is quite different. His main source of income is in pounds, his most important bills would be in pounds, and his future is tied to the pound. All the merry-go rounding (including losing money in the currency he needed for an unspecified period) to make an extra 200k was not particularly valuable.

This is where the lesson is. My friend and I are playing different games.

Do not play another person's game. Play your own game.

—————

I am currently at a stage where I will likely take some important life decisions soon.

So one thing I think about sometimes is, how can you optimize for decision-making? How do you approach choosing between path A and path B? How do you know whether to ignore both paths and just stay in the middle of the road? Are these decisions more logical (as per pros and cons and what is ‘best for you’) or more emotional?

For many of my friends and other young people I talk to, the situation is similar.

Job with low salary but good reputation vs Job with great salary but boring industry?

Stay in a job with big promotion at end of the year vs launch startup idea now?

Focus on startup idea vs apply for Canada PR?

Do Masters in country A vs Ph.D. in country B?

Take a scholarship for a course I don't like vs a loan for a course I love?

Enter a relationship now and commit vs ignore alladat and see how life goes?

Finish UI BSc with two years to go vs jand and start all over without ASUU?

There are no easy answers to any of these questions. I personally have no clue.

But the way I think about my personal decision-making, for now at least, is around two constraints - reversibility and stability in time.

How do I mean?

Reversibility

Reversibility is quite straightforward. It means, how easily can I undo this decision?

Some things are much easier to walk away from than some others. If you decided to switch from a skin cut to keeping an afro for example, that is super reversible - all it needs is a visit to the barber.

But a decision to have a baby? Not reversible at all, because you can't undo a baby. (Unless you were part of the Kufar in jahiliya period, of course. 😉)

For decisions that are reversible, my approach is to take them fairly quickly and without dwelling too much. I can also afford to ‘follow my heart’ and be more emotional. If it does not work out, I can reverse the old decision and do what appears to make more sense.

If someone had two job offers in Lagos and Paris for example, I’ll say take the role in Paris. Apart from the thrill of a new city and getting international experience, you can always return to Lagos if you changed your mind. But if you took the Lagos role and ended up not liking it, you do not have the necessary work authorization to easily relocate to Paris.

Stability in time

Stability in time is usually useful when you do a more analytical comparison. You might have drawn up a list with pros and cons of different options and be stuck because there is no clear distinction.

What does stability in time mean? It means do the features of this decision stay constant or do they change over time?

For example, in evaluating two people, you might find that they each have big pluses. One might be super attractive, the other might be very patient. Both of these are great qualities.

But physical attractiveness is not stable in time - we all become ‘uglier’ (sorry old people! 😂) as we age. On the other hand, patience is a trait that is relatively stable in time. In 5 or 10 or 20 years, a patient person will likely still be a patient person.

Another example might be in choosing an area of specialization, perhaps at school. A course like Library Science might not be the wisest thing to devote years of study to, as the relevance of the degree reduces every day. Meanwhile, a course like Psychology would likely be relevant till thy kingdom come.

So yes, dazz eet.

Are these the only things to consider when making important decisions? No.

Will using these factors automatically solve your problems? Far from it.

But I genuinely believe they will broaden your perspective, and bring you just a little bit closer to making the right choice.

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If you found this newsletter useful, please share it with your friends. Have them read it and subscribe. I like to share personal stories and life lessons as I learn. They will be super random, but common themes will include business, personal development, human relationships, and Islam.

Gracias, and see you around.

Hameed

** Jara content:

There was something I really wanted to get last week. It was not a need but it would have been very very nice to have. Well, I did not get it and felt bad for a while. Then my brother mentioned these words on a call for an unrelated matter, and I could not help but think of how useful they were to my situation.

وَعَسٰۤى اَنۡ تَكۡرَهُوۡا شَيۡـئًا وَّهُوَ خَيۡرٌ لَّـکُمۡ​ۚ وَعَسٰۤى اَنۡ تُحِبُّوۡا شَيۡـئًا وَّهُوَ شَرٌّ لَّـكُمۡؕ وَاللّٰهُ يَعۡلَمُ وَاَنۡـتُمۡ لَا تَعۡلَمُوۡن

“It may well be that you dislike a thing even though it is good for you, and it may well be that you like a thing even though it is bad for you. Allah knows and you do not know.” - 2:216

Have a great week. ✨