You’ve decided which asset class and investment product suit you. It’s time for your last main investment decision.

Which product house?

The product provider could be a life assurer, a unit trust management company or a linked investment service provider (LISP). When choosing product providers, look for companies that are:

1. Focused on small, retail clients

Many companies claim that you, the retail investor, are important to them. In reality, they prefer to take your money through intermediaries like financial advisers or retirement fund trustees, rather than dealing directly with you. Signs that they are not really that interested in direct clients include:

• Very little investor education literature
• A poorly staffed call centre and irritable staff
• A website that provides very little practical information on the investment process
• No clear communication, a.k.a. simplified English policy
• An almost immediate referral to a financial adviser when you contact them

Most companies seem to still believe that dealing with direct clients is too time-intensive and expensive. A rare few know how to leverage modern technology to cost-effectively service even the smallest retail investor well.

2. Fit and proper

With unit trusts, it’s highly unlikely that your money can just disappear. The Financial Services Board approved the independent trustees who look after the money in the trust. Still, it’s always important to verify that the company you want to invest with, is fit and proper. I usually check that they at least have a licence with the Financial Services Board and read on HelloPeter what existing clients are saying about them.

3. Flexible

I choose companies that, irrespective of the investment product I choose, provide me with ‘open architecture’ to build my own underlying investment portfolio. If I, for example buy a retirement annuity, I want access to any one or a combination of unit trusts available in South Africa as the portfolio in which my portion of the retirement annuity fund will invest. Just be careful, if the product provider has an in-house investment manager, you may pay extra (in the form of an administration fee) if you prefer a third-party investment manager.

4. Transparent

Ideally, you want to be able to see a list of all the underlying assets in which your investment product invests, as well as all the expenses associated with the product. It’s very difficult to know exactly how much of your investment portfolio is paid away as expenses and administration costs if you invest in opaque old-fashioned policies. But if you choose an open architecture product, you can track the total expense ratio (TER) of your chosen underlying unit trust portfolio.

5. Affordable

With unit trust portfolios, the total expense ratio (TER) is a ratio expressing the investment management fees, audit fees, custodian fees, portfolio bank charges and taxes as a percentage of the market value of the portfolio. (These costs decrease the return on your investment.) The ratio changes every quarter and is based on the previous year’s expenses. The TER does not have to include the portfolio’s stock broking fees and these can be quite high if the investment manager trades often. Some companies, like Allan Gray, decided to include brokerage in their TER calculations to give the investor a better idea of the true costs associated with running the unit trust. This makes it more difficult to compare the cost of different unit trusts using their TERs, but generally unusually high historic TERs require further investigation.

The TER does not include all costs carried by the investor. You could also be paying a fee to a life assurer for providing the wrapper of your investment. Or an administration fee to a LISP for acting as an agent in the investment process. And if a financial adviser helped you with your application process, you could also be paying initial and ongoing adviser fees (also called ‘broker fees’). The adviser has to disclose these costs and you will have to sign on the form that those are the fees that you have negotiated.

The life insurance industry uses another ratio, the reduction in yield (RIY), to indicate the annual impact of expenses on your investment. Unfortunately, this is not comparable with the unit trust industry’s TER. It’s a good idea to always ask for a complete cost breakdown for all products that you are considering. In the case of open architecture products, also enquire whether the underlying portfolio pays a rebate to the product house from which you’re buying the product and whether that rebate is passed on to you in the form of lower costs.

That covers your five big investment decisions. You probably have plenty more questions like ‘Satrix or unit trusts?’, ‘your own share trading account or someone else’s fund?’, ‘direct or listed property?’ We’ll cover these asset class-specific questions over the next few weeks.

Which investment product?

Foreigners are often surprised at the sophistication of the South African financial industry and the wide array of products available here. Don’t worry, I won’t cover them all in this post; only the three most popular ‘wrapper’ products available to individuals.

What is a wrapper? Your investment portfolio forms the heart of your investment. In other words, your choice between interest-yielding assets, shares, property and offshore assets drives the growth and volatility of your investment. The structure around your portfolio is the wrapper. Your choice of a wrapper will determine how your investment is regulated, when you may withdraw your money, how much tax you pay on income and capital gains, and many other issues that surround your investment.

1. Unit trusts

Unit trusts allow you to pool your money with many other investors, all investing in the same portfolio as you. The portfolio can consist of only interest-bearing assets, property, shares, offshore assets or any combination of asset classes. The assets are held by trustees on your behalf. You share in the growth and income of the portfolio in the same proportion as your number of units to the total number of units in the portfolio. You can access your money within 24 hours and add money to your investment at any time.

Unfortunately, you don’t get any tax-relief for your contributions and you become liable for capital gains tax when you withdraw your money (if there was any capital growth). You will also receive a certificate every year to show how much interest, rental or dividend income the portfolio earned and you have to declare this in your tax return.

Unit trusts form part of a bigger group of investment products called ‘collective investment schemes’ and they are regulated by the Association of Collective Investments. Their prices are published daily in most newspapers and you can view all the assets in the portfolio at least quarterly.

2. Retirement annuities

Technically, buying a retirement annuity actually means you become a member of a specific retirement fund. The fund’s trustees look after your interests. Sometimes the trustees buy an old-fashioned retirement policy on behalf of all members or an individual policy for each member. Often the policies contractually bind you to contribute premiums on a regular basis until a certain retirement age and penalise you if you stop contributing earlier. The life insurers issuing the policies usually appoint asset managers who choose the underlying investment portfolio.

Nowadays there’s a more modern, flexible and transparent version of the retirement annuity which allows you to choose your own investment portfolio (often a unit trust) and also allows you to contribute only when you can – without penalties. Still, neither version allows you to withdraw your money before you reach age 55. The age is determined by retirement fund legislation.

Why would anybody choose to be locked in for so long? Retirement annuities currently provide great tax benefits for the self-employed, as the government wants to encourage you to save for old age. As a tax-payer, you may therefore receive a tax rebate on your contributions, subject to certain limits. In addition, neither you nor the retirement fund pays any tax on the income earned by the investment portfolio. It’s only when you start drawing your pension, that you could pay tax on your retirement income exceeding the annual income threshold.

Unlike unit trusts and endowment policies, regulation requires the trustees to use their discretion when they decide who your dependents are and where the money should go after your death. As a result, they may overrule your beneficiary nomination.

3. Endowment policies

Like the old-fashioned retirement annuity policies, endowment policies have become unpopular because of the high penalties life insurers charge when you end the policy or stop your regular contributions before the contractual end date. Traditional endowment policies also do not allow you to select your own underlying investment portfolio and don’t always regularly disclose all assets in the portfolio they select on your behalf. Legislation effectively forces you to remain invested for five years. If you need the money earlier, you can withdraw it, but won’t receive more than your contributions plus 6% compound interest per year.

With all these restrictions, why do some people still prefer this wrapper? Unlike unit trusts, you don’t account for your investment income and capital growth in your tax return. In other words, you are not taxed directly; the fund that pools your contributions with that of other individual policyholders will pay the tax to SARS on your behalf. Currently the rate is 30% on all interest and rental income. Even though you are not taxed directly, the net effect is that you are left with only 70% of the interest and rental income earned by the portfolio. Individuals paying more than 30% tax on their annual interest and rental income may therefore benefit from the 30% tax rate of the endowment policy. Unfortunately, the policy doesn’t allow you to use your R19 000 annual interest exemption as an individual – interest earned by the portfolio is taxed from the first R1.

An endowment policy is therefore only an option if:

• You are a high income tax payer
• You expect substantial amounts of interest or rental income from your investment portfolio

Endowment policies have also evolved over the years. It is now possible to purchase policies that allow you to choose your own underlying investment portfolio, often from a wide range of unit trusts. Because the unit trust is wrapped within the policy, it follows the tax and other rules of an endowment policy, but offers the transparency of a unit trust investment.

If you feel you’ve invested enough in yourself and your debt is under control, it’s time for the next decision:

Which asset class?

Let’s leave the alternative asset classes like hedge funds, derivatives, commodities (e.g. gold), private equity (e.g. venture capital) and collectibles (e.g. art and coins) out of the picture for now and start with the basics – the traditional asset classes:

1. Money market (cash)

Put simply, this is where you sell your money to an institution in return for interest and the repayment of the loan within one year. Depositing your money in a savings account is a money market transaction. So is pooling your money with other money market unit trust investors, which allows you – through the trust – to buy a variety of cash-like instruments that are not normally available to individual investors.

Looking at the data in Triumph of the Optimists, the money market has returned about one percent more than inflation per year, on average, over the past century. But if you’re a tax-payer and younger than 65, you’re currently taxed on all interest above R19 000 per tax year. If you’re investing large sums, you could therefore be left with a return that’s not even keeping up with inflation. On the other hand, money market is the most stable of all investment options (the value of your investment doesn’t fluctuate much).

The money market is therefore great for those who:

• Need a short-term parking bay for their money
• Invest small amounts on which the interest will be less than the R19 000 annual tax threshold
• Can’t stomach the volatility of the other asset classes
• Have a more pessimistic view of world markets and believe that the historically better investment returns of the other asset classes won’t be repeated over the next few decades.

2. Bond market

Like the money market, this is a market in which you lend your money in return for interest, but the term of the loan is usually much longer. And there’s no guarantee that you’ll get back the same amount as your capital invested, as the capital value of the investment fluctuates. The borrowers could be governments or big corporates raising finance through bonds rather than issuing more shares. Usually, the higher the interest rate being paid, the higher the credit risk of the borrower. Credit risk indicates the likelihood of the borrower not being able to repay the debt.

Over the past century, the bond market has, on average, returned about two percent more than inflation per year before tax. (The tax on income from bond instruments works the same as for the money market.) But the uncertainty of return is much higher than in the money market. For example, during the first six months of 2008, our All Bond Index returned -6.7%.

The bond market is perhaps more appropriate for investors who understand credit risk and the impact of interest rate movements on the bond market very well. Less experienced investors who want a slightly higher return than money market may want to out-source the decision between money market and bond market to flexible income unit trust managers. Their job is to analyse the prices of money market and bond market instruments, and then invest in those that they think offer the best value for money. As a result, the portfolio is often exposed to the best of both asset classes.

3. Property market

If investing directly in property, you earn income in the form of rent and hopefully also see some capital growth (an increase in the property’s value). Your return on your investment is a combination of these two factors. Property indices returned about five percent more than inflation per year, on average, over the past few decades. Property prices can also decline for uncomfortably long periods, but they are not as volatile as equity prices.

Unfortunately, this market has high minimum investment amounts (not many properties left under R500 000). Most people therefore have to get a mortgage and it can take quite a few years before the rental income exceeds your bond repayment, levies and taxes. Direct property investment is also relatively illiquid. In other words, it could take a while before you are able to sell at a reasonable price. Alternatively, if you want to use less capital, you can opt for a property unit trust (PUT) or buy units in property loan stock (PLS), where you pool your money with other investors also wanting exposure to the property market.

4. Equity market

Here you buy a share in one or more companies. When they make a profit and don’t need the earnings to expand the business, they pay you a dividend. Hopefully, your share price will also increase as the company grows, but share prices can be much more volatile than bond or property prices. Your return on investment will be a combination of the dividends received and the change in the share price. Over the past century, equity markets have returned about seven percent more than inflation per year, on average. But over the short term they could lose a lot of value – as much as 50% or even more.

A 10% tax on dividends is in the pipeline, but this will only replace the current secondary tax on companies (STC), which is also 10%. The net impact on shareholders should be the same.

The equity market suits those who:

• Don’t need the capital within the next 10 years
• Can stomach volatility of share prices
• Believe that markets haven’t changed structurally and that the equity market will continue to be the best performer over the long term.

5. Offshore markets

The South African equity market forms only 1% of the world market and investing internationally can be a great way to diversify your portfolio. And the more the rand depreciates, the more your investment is worth in rand terms.

But if you only invest offshore, you should prepare for some turbulence. Even if you invest in the stable money market offshore, you will witness the rand value of your investment zig-zag from one day to the next. That’s because the exchange rate is so unpredictable over the short term. If you therefore invest offshore in a more volatile asset class like equity, you could see even bigger changes in the rand value of your investment. Over the long term, in theory at least, the rand is suppose to depreciate against the major world currencies at a rate equal to the difference between our inflation and the inflation in their countries.

Back to our question: Which asset class?

If you will need your savings within the next year and tax is not an issue, the money market is your safest option.

If you have money you won’t need within the next 10 years, and you want to diversify your portfolio, you may be interested in all three of the riskier asset classes, i.e. property, equity and offshore assets.

If you think you’ll need the money within the next two to 10 years, your decision becomes tougher. A flexible income or a low-equity portfolio (no more than 40% in equity and the rest in money market) should provide a slightly higher return than the money market – if you stay invested for a few years. More equity in your portfolio increases the volatility of your investment, but also the potential for a higher return.

While a whole century of performance data for each asset class shows the long-term picture, it unfortunately can’t guarantee your future return.

You’ve got some spare cash. It could be a lump sum windfall or you may find that you consistently have some money left at the end of every month. You could invest it, but your outstanding debt is bugging you.

Should you settle your debt first?

If I was working for a big financial institution, telling you anything other than ‘Yes’ would probably get me fired – or reprimanded at the least. It’s regarded as irresponsible to encourage people to borrow to invest, which is effectively what you’re doing if you’re investing while you still have debt. But I believe the answer is not that simple and there are a few issues at stake, such as:

1. Return on investment (ROI)

What is your borrowing rate? If you owe money on your credit card at 23% interest, settling your debt would have the same effect as an investment with an ROI of 23%. (Think of it this way: If you owe R10 000, you would have needed to pay R 2 300 interest on that over the next year. By ‘investing’ R10 000 in your credit card debt, you are left with R2 300 extra in your pocket over the next year – an ROI of 23%).

Do you know of any investments that could beat your borrowing rate? According to Triumph of the Optimists, equity returned about 7% more than inflation, on average, over the past century. This makes it the best-performing asset classes over the long term. With inflation hovering just above 10% at the moment, settling your credit card (or other expensive) debt first is a no-brainer. But what about a home loan with a borrowing rate of 14%? Surely, you can find an investment with a higher ROI, you may think. But are you comparing apples with apples? With the other investment, how certain are you of your ROI?

2. Uncertainty (a.k.a. ‘risk’)

When you settle or reduce your debt, your return is guaranteed at the rate of borrowing. On the other hand, if you choose to invest in property or the stock market, there are many uncertainties. Are we heading for a long-term recession like the world’s 2nd largest economy, Japan, which could suppress the stock market for longer than you expected? Will you always have tenants providing you with steady income on your property investment? What is the next version of the current sub-prime crisis and how will it impact on your investment?

3. Cash flow

Do you have enough emergency cash in a money market unit trust or another easily accessible and stable investment product? If not, you may want to rather keep your spare cash for any unforeseen events that could really hurt you financially. Do you perhaps have a home loan account that allows you to withdraw any extra payments within 24 hours? Transferring your extra cash to this account could provide a really good, tax-free return, with the benefits of an emergency fund.

4. Tax

If you are considering investing your spare cash, how much tax will you pay on your return? Any interest and rental income over your annual allowance of R19 000 will be taxed at your marginal tax rate (the rate of your tax bracket as determined by SARS). In contrast, your return on your debt settlement is tax-free.

Have you looked at the flip-side of our tax system? Are there any investments that could provide you with some tax-relief? In other words, the more money you invest, the less tax you pay. Retirement annuities (RAs) immediately jump to mind. Liberty, for example, launched a quirky, but memorable ‘Love the Taxman’ campaign earlier this year to remind you that you can contribute 15% of your non-pension funding income to an RA and deduct those contributions from your taxable income when completing your tax return. If you’re in the 40% tax bracket, you could see an ROI of 40% due to the tax-rebate alone, and that’s before adding the growth of your RA investment over the year. I don’t know for how much longer this opportunity will be available, though. Policymakers are working on new legislation that will limit the RA contributions on which you can claim tax-relief, as there have been complaints that current legislation favours high income earners.

5. Time

Debt can keep you in a job you don’t really enjoy or make you postpone those full-time studies or travelling which you’ve been dying to undertake for so long. The sooner your debt is under control, the sooner your time is your own again.

6. Emotional benefits

Let’s face it, being debt-free can be pretty euphoric. While encouraging you to look at the hard figures like ROI and tax benefits when weighing your options, sometimes getting those shackles off is about more than just the money.

MoreThanMoney members seem to have plenty of investment questions. Thanks, these inspired me to write the next few posts on the most important investment decisions you may need to make along the way to great wealth.

Have you invested enough in your own earnings potential?

Maybe you find the whole idea of investing quite depressing. Everybody else talks about the right time to buy property and which shares are cheap right now. But you struggle just to get by every month – not able to save anything, let alone buy your own property? Or you save and save but it all feels like a drop in the ocean compared to the sums you would need to realise your dreams.

You’ve already cut your budget to the bone and further skimping would actually not make live worth living. But how about increasing your earnings potential? No need to remind you: you can only invest when you have enough disposable income. If you still have several working years left, your most important investments right now may be to:

1. Get a further education

The 7th UASA Employment report of 2007 states that someone with a bachelors degree earns more than 250% more than someone with only matric. The salary for a worker with only grade 11 nearly doubles when he or she completes matric. Yes, a tertiary education costs money, but over a normal lifespan a person with a degree will see a return on that investment that’s 308% higher than the return on investment of someone who did not continue studies after matric. Currently, a bachelors degree through Unisa costs around R16 000 (excluding books) which looks even more affordable when you consider that the tuition fees are spread over several years of study.

2. Welcome more experience

Irrespective of the level of your schooling, are you constantly trying to learn as much as you can on any job in which you may find yourself? In fact, are you thinking about long-term earnings when you choose your roles or projects? The pay may be poor for a year or two, but the experience could be worth millions of future earnings.

This is what Donald Trump has to say about the value of experience: ‘A couple seasons ago, we based an entire season of The Apprentice on this premise, pitting highly educated candidates against those with less formal schooling. In the end, we discovered that the key to success was experience, not education. Experience comes from action – or doing – and involves taking risks.’

3. Boost your confidence

Do you have a career handicap, such as a fear of public speaking or numbers? Ever considered coaching or private lessons? Even conquering only one fear can boost your confidence in all other aspects of your job.

Your skill-set and experience remain your greatest assets while you still earn active income. And you may even find that as your income rise, those boring investment topics start to appear more and more interesting to you!

As someone who matriculated in the year Nelson Mandela was set free and the ANC unbanned, questioning text books just happens naturally. I can’t help but to have more faith in collaborative data from a wide range of people, as you would find on Wikipedia, than in any article by only one author. But reading James Surowiecki’s The Wisdom of Crowds this week convinced me that there are at least four prerequisites for groups (including the MoreThanMoney community) to function intelligently.

Groups work well when there’s enough:

1. Diversity: The more diversity in a group, the greater the number of opinions and potential solutions that the group can produce.

2. Independence: Independent members are more likely to add new information and can prevent mistakes from becoming correlated. It takes an independent, highly confident and outspoken individual to break the spiralling destruction of an information cascade, also known as ‘hype’ or ‘groupthink’.

3. Decentralization: This organisational structure allows members to specialise their labour, interests and attention, which in turn helps the group to benefit from local, detailed knowledge.

4. Aggregation: A system is necessary to feed all the information to a place where it’s visible to the entire group (and preferably filtered through debate and a ranking mechanism).

Google is a prime example of how we, the crowd, help you find the exact information you were looking for within seconds. Google uses the democratic link structure of the web to decide how important any particular page is. A link from page A to page B counts as a vote by page A for page B. Google not only takes into account the number of votes that a pages receives, but also the importance of the page that casts the vote – weighted aggregation.

www.experts-exchange.com is another group attempt at problem-solving. A dazzling number of insights are aggregated every day, with members constantly filtering the good ideas from the bad. As a result, the group has come up with solutions to more than two million technical problems.

Groups fail to come up with intelligent answers when:

1. Participation is skewed: The Presidential Aids Advisory Panel of 2000 is a local example of how lopsided participation can lower group intelligence. President Thabo Mbeki requested a secure internet facility reserved exclusively for debate around the HIV/Aids causality. But the site mainly attracted the so-called ‘Aids dissidents’. Very few mainstream medical specialists entered the debate and posted their findings and supporting evidence. At the end of the two-month collaboration, it was evident that the panel was unable to provide a balanced view.

2. Members guess what the rest of the group thinks: For example, stock market prices are not only determined by what members think a company is truly worth, but also by what they think the rest of the market thinks it’s worth (with re-selling in mind). When members anticipate that other members will be willing to pay almost anything for an e-commerce company, for example, an information cascade or stock market bubble starts forming.

3. Too powerful or less-informed members speak first: The order in which information is received is particularly relevant in the case of forums. The first contributors generally create the structure of the discussion. When contributions are received in quick succession, often without members having time to read the comments, there is normally a larger pool of different solutions.

4. Members lose their identity within the group: Group psychosis can lead to terrible decision-making, as at soccer riots, for example.

5. Members are not properly incentivised: Real or play money or just boosting their esteem has been found powerful enough to focus people’s efforts to provide more accurate answers. A prominent journalist was once connected to the Kennedy assassinations in his Wikipedia profile after a prank entry. Maybe, if the prankster had more reason to protect his own reputation online, he would have provided more accurate information.

6. The outcome is not considered that important: With fashion trends, little independent thought goes into deciding whether those skyscraper heels or skinny jeans are really wise – it’s a frivolous decision. As a result, the outcome of the crowd’s decision-making process usually isn’t very smart.

Why we still desperately need experts

James Shanteau recently investigated between-expert agreement in a range of fields, including investment management and clinical psychology. He found the agreement to be less than 50% for most fields. Not only did the experts whom he studied struggle to agree on the facts, but they also found it difficult to calibrate their judgements, i.e. remain conscious of how certain they are of their findings. No expert is without her blind spot.

Still, looking at Surowiecki’s four requirements, the collective intelligence of the crowd depends greatly on independent experts with diverse opinions. It is enriched by every member’s specialised knowledge. Now the many perspectives of online aggregation tools can only help to illuminate those blind spots.

I’ve seen that look in their eyes when people start telling me how they want to quit their jobs and start their own businesses, or tackle a life-long dream, but something is holding them back. It’s the look of frustration mixed with self-doubt and fear. Mostly fear of failure and fear of the unknown.

I haven’t conquered either of the two big fears, but I’m slowly catching on to the idea that failure is just a normal, integral part of life. In fact, repeated failures and eventual successes are the reasons humankind make any progress at all. Like Tom Watson, the president of IBM observed, ‘If you want to increase your success rate, double your failure rate.’ The more comfortable a society is with failure, the faster is its collective learning.

Failure could even make you brighter. According to creativity and learning guru Tony Buzan, learning to learn is the real achievement. Many people won’t try a new challenge until they’ve done all their homework and are 100% sure that they will succeed. But your brain is designed for a more experimental and explorative model. Remember how we all learned to walk, talk, ride a bicycle…? Buzan uses an acronym for the steps your brain has to take on the road to success, TEFCAS:

1. Trial – this is every attempt to achieve a goal (depending on the goal you may need only a few or thousands of these).

2. Event – this is the memorable moment when you miss the ball, go blank in front of your audience or is unable to deliver on a promise to a client.

3. Feedback – When the Event happens, your brain receives information through your five senses and intuition.

4. Check – Your brain will consciously and automatically check how you have performed in relation to your goal.

5. Adjust – You will then make the necessary adjustments for your next trial, always keeping your goal in mind.

6. Success – Reaching your goal after repeating steps 1 to 5 as many times as needed. But watch out, during the learning process your brain usually doesn’t judge your goal. If it is something negative like harming yourself, it will still view reaching that goal as success. Therefore be careful how you formulate your goals.

When Buzan asked people why they practise or repeatedly try something, 99% of the response sounded like this: ‘To get better with every attempt’. But this is an unrealistic expectation and not the way human learning works. Skill or performance does not develop like an up-ward sloping line – even the world’s greatest sport people have days when they just can’t do anything right. Thomas Edison failed 9 000 times before he perfected the light bulb. If you expect to progress all the time, the first Event that looks like regression could make you quit on the spot. Prepare for ups and downs and endless displays of no-progress. Some you win, some you lose.

I recently heard a striking definition of an expert: ‘someone who has already made all the mistakes possible in a particular industry’. Meant as a joke, but there is some truth in the statement. While it’s a great achievement to reach success after only one trial, a few mistakes or even a major failure could equip you better for future projects – and leave you with more stories to tell.

While it makes sense to have your big failures early in life when they’re usually cheaper and you’ve got more recovery time left, failures later in life can also be a blessing in disguise. In his famous Stanford address, Steve Jobs has the following to say about getting fired from Apple 10 years after starting the business from scratch, ‘(It) was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.’

J.K. Rowling’s recent speech to Harvard graduates echoes that of Jobs. ‘Failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. Had I really succeeded at anything else, I might never have found the determination to succeed in the one arena I believed I truly belonged. I was set free, because my greatest fear had already been realised, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so rock bottom became the solid foundation on which I rebuilt my life.’

I don’t have the same glamorous story, but I can identify with Rowling. I had always believed that I could do anything until I collided head-on with Mathematical Statistics 314. I did so poorly in the exam that they wouldn’t even allow me to re-write. As a result, I never qualified as the professional, admired, well-paid actuary which I thought I was on the road of becoming. It was painful and a severe blow to the self-esteem at the time, but it prompted me to start and complete my humanities degree a few years later. I don’t even want to imagine missing out on topics like satire and subversion, post-colonial thought, advertising, editorial practice, eco-criticism, gender studies, African prose, magic realism – an intoxicating journey through the world of ideas.

Yes, sometimes repetitive failure embitters people and that will always be one of life’s great tragedies. But I suspect that a little bit of failure now and then actually turns most people into nicer, more empathetic human beings. Every trial, every leap of faith may not always allow us to touch our goals, but it keeps us in the hero-zero relay called human existence. We’re on track.