In one of his most cited quotes, the iconic and sometimes enigmatic Bruce Lee said:
“You must be shapeless, formless, like water. When you pour water in a cup, it becomes the cup. When you pour water in a bottle, it becomes the bottle. When you pour water in a teapot, it becomes the teapot. Water can drip and it can crash. Become like water my friend.” -Bruce Lee
Sometimes referred to as the ‘Godfather of Mixed Martial Arts’, Bruce was clearly referring to being adaptable and flexible when it comes to hand-to-hand combat. As a martial artist, Bruce was one of the first to recognise the importance of not being tied down to a single ‘style’ and flowing with whatever the situation or your opponent throws at you.
Like most timeless ideas of philosophy, this has a broader universal applicability beyond fighting. In fact, what Bruce was talking about is not a new concept, but rather a very old one. Both the Taoists and Stoics have written about living ‘in accordance with nature’,and flowing with the ebbs and flows of destiny instead of ‘forcing’ your way through life.
So how does this apply to real estate investing?
The first level of looking at this would be to say that just like a fighter, a real estate investor needs to find the balance between staying his course and adapting to the changes of the market and calibrating his investments and strategies accordingly.
But a deeper layer of analysis would be to examine the water-like quality of capital itself, which is the basis of all property investments.
Just like water can take the form of a cup, bottle or teacup as Bruce said, capital is even more versatile and can literally take the shape of anything that carries value and be commoditised. Capital can turn into a physical object such as a computer, real estate, pizza, or even ‘invisible’ services such as a haircut or investment banking functions.
Even our language reflects this reality. Finance professionals often use terminologies such as an asset being ‘liquid’, ‘cash flow’ statements, credit ‘drying up’, ‘pools’ of capital or regulatory bodies ‘freezing’ laundered funds.
A bit of contemplation on this will reveal that capital permeates society and quite literally flows throughout it. The best financiers, entrepreneurs and investors know that the key is to create or acquire an attractive asset that capital can ‘pool’ around such as a company or real estate holdings.
When you have an asset, it is like a small pond or a lake that has small inlets or outlets of water. Water may flow in or out of it causing the lake to ebb, but as long as the asset holds value there will always be a ‘pool’ of water, or equity. The job of the investor is to create multiple ‘inlets’ of capital that brings new water into the pool of capital, and minimise unnecessary outflows of water. Having multiple ‘inlets’ ensures that if one of those were to get blocked up, the pool of water will not drain out and dry up.
Next week, we will continue this line of thought by looking at how one shift in paradigm has the power to accelerate personal wealth creation