by Jacob Taylor
“So the answer on dividends is, it depends,” I surmised.
“Yes, the same answer to most thoughtful questions,” he said. “Now, it’s getting late and I’m dreadfully tired. Like I could sleep forever,” he said.
“Don’t you go dying on me just yet, old man,” I said. “I have a feeling we still have some important topics to cover.”
“Indeed, we do,” he said. “The guest bedroom is down the hall. If I don’t see you in the morning, have a great trip to Catalina.”
“I’m surprised you remembered,” I said.
“I’m full of surprises,” he said as he was nodding off.
I found the spare bedroom and crashed into bed. I was up before dawn to catch the earliest flight home. As I was leaving, I made my way passed Mr. X’s hospital bed in the living room. He laid there serenely, breathing his assisted oxygen. The bed looked too big for him; his body was small under the blankets.
I couldn’t help feeling choked up wondering how many visits we had left.
CHAPTER 34
Finally, our romantic vacation to Catalina Island! A getaway like this was just what Steph and I needed to rekindle the fire doused by our respective grinds.
It was a quick flight down to Long Beach and a taxi ride to the port terminal. From there, we caught the boat to the heart of Catalina, arriving on the island just in time for lunch. Our hotel check-in wasn’t until 3pm, but they accepted our bags and recommended a brewhouse close by. We ordered a couple burgers and flights of different beers to sample. Life was good.
Stephanie seemed to be drinking her beers with an uncharacteristically aggressive pace. It wasn’t long until she had blown through tipsy. Slow down, hon… we just got here.
She put a knife in the back of our small talk with a pointed look. “Nick… we need to talk.” The most dreaded four words in the English language.
She began, “I’ve been thinking… our parents are so different. Yours don’t seem to care what you do. Mine definitely care. They don’t like that we’re living together and not married. They tell me it’s sinful. Whenever I see them, they make snippy remarks about it. It’s really bothering me.”
“OK,” I said. “What do they want us to do? Find separate apartments again?”
“I don’t know what they want,” she said. “I don’t know how to make them happy.”
I never understood what the problem was with living together before you were married. Imagine the horror of only learning about your partner’s “little quirks” after being locked down by holy matrimony. Who would ever roll those dice? What if she shed like a rottweiler or left clipped toenails on every flat surface? What if he shrunk all your clothes and liked playing trombone at two in the morning? Sorry, no refunds--you’re in it for the long haul. People will test drive a car that they’ll keep for two years, but not a living arrangement that’s supposed to last forever. Surely, you’re joking, Mr. Feynman?
She startled me back to reality, “Are you even listening to me?”
“Yeah, of course, babe. Do you think they want us to get married?”
“I don’t know,” she said. “They haven’t said that. I don’t think my dad wants us to.”
“Your dad definitely doesn’t want that,” I said. “Don’t you think we’re a little young to get married?”
“Probably, but my parents were already married and had a family started by the time they were our age. And they seem happy.”
“That was forty years ago when people only lived to sixty. What’s the rush?” I asked.
“I guess there isn’t a rush, but don’t you want to know where this is going?” she said.
“They think I’m not good enough for you, don’t they?” Her dad made little effort to hide his disgust that his daughter was under-kicking her coverage.
“What? Why are you making this about you?” Her eyes searched for something in mine. “I’m trying to share with you how I’m feeling,” she said.
“Well, I don’t know how to fix it,” I replied.
“I’m not asking you to fix it,” she said. “I just want you to understand.”
“Why are you telling me about something if you don’t want me to fix it?”
“God, you just don’t get it,” she said.
“What don’t I get?”
“Nevermind.”
We sat in silence until the check came. Not exactly the best start to a romantic getaway. I paid the bill, and we stepped out into a scene fit for a postcard. The views did nothing to mend the rift between us. Across the street, there was a bike shop. I had an idea. “Hey, I know. Let’s rent some bikes and explore the island.”
“Fine.” Clearly not fine.
Being a busy Saturday, all the shop had left was a tandem bike. “We’ll take it!” I said, hoping to turn our vacation around with some adventure. We wheeled the bike outside and made every effort to pedal away gracefully. I realized immediately that this plan was doomed. Riding a tandem bike turns out to be much harder than it looks. If both riders aren’t on the same page and leaning in unison, it’s incredibly difficult to steer. We were out of sync on all fronts, so no surprise we struggled to navigate the twisting, narrow island roads.
After a stretch of riding that involved more frustration and biting remarks than sightseeing, Stephanie asked if I had a plan beyond meandering all day. She wanted to know where we were going.
“I thought we could check out the botanical garden on the island. I read it’s supposed to be really nice. I think it’s just a few turns ahead,” I said.
“No, Nick. I mean, where are we going with this relationship?” Oh, she meant the existential where are going.
“That’s a big question, Steph.”
“Well, I want to know what you’re feeling.” Ugh, feelings.
“I love spending time together. When we aren’t on a tandem bike that is.” I had a bad habit of making jokes during serious conversations to add levity.
“I’m serious. And what ‘time’ are you talking about? You’re always so busy with work, school, and traveling to Wichita. We barely see each other despite living under the same roof.”
A lot had changed in my life. I went from a starving journalism student with no girlfriend and lofty goals of changing the world, to a cog in a corporate wheel with a live-in girlfriend. “I know I’m busy,” I said. “I don’t even know how I ended up here. It feels like things just keep happening. Little steps I didn’t realize I was taking.”
“You mean with me?” She was starting to tear up. Pull up! Pull up!
“No, no. I meant with getting a job at Big Rock and going back to school. And then with Mr. X and Wichita. I felt like at every step I only had one move--keep going forward. Like I was being swept along by life.”
“Maybe my dad is right,” she said while staring off and shaking her head. “You don’t know what you’re doing. You aren’t a real grown up yet.”
I wanted to be angry and offended. But sometimes a statement rings so true it cuts you to the core, and you’re incapable of response. Then the anger from your bruised ego finds a foothold.
“Whatever,” I said. Of course I’m not a real grown up. I brooded as we struggled through a series of turns. My pocket started chirping with a phone call.
“Pull over, please,” I said in a huff. “I have to take this.”
It was Cathy. Mr. X had taken a turn for the worse and was in the hospital. I was to get to Wichita as fast as possible for goodbyes. I hung up in a state of shock. I went from dull hot anger to an icy sharp knot in my stomach. Had I already shared my last words with Mr. X? I hope not! Cathy had hung up, but the phone remained by my ear as I stared off vacantly.
“What is it?” she asked.
“I have to go,” I said, catatonic.
“What?!” she snapped. “Go where? This was supposed to be our weekend, Nick!”
“Wichita… Mr. X is summoning me.”
“Summoning? Like you’re his butler? It can’t wait until Monday?” she
said.
“He’s in the hospital and may not have until Monday,” I said.
“That’s terrible news,” she said. “But you know, old people go into the hospital all the time. We’re still having regular last visits with my grandma. Stay here with me please.”
“I can’t. I have to go.”
“OK,” she said, tearing up. “If you have to go, go. I guess I’ll just stay here and enjoy a romantic vacation for two.” I didn’t know what else to say other than that I was sorry.
I pulled up the ferry schedule on my phone. If I hustled, I might make the next boat off the island. I didn’t have time to make the necessary relationship repairs. That conversation would take hours. Days? Decades?
I yelled another apology over my shoulder as I ran off, leaving her by herself on a tandem bike by the side of the road. Who said chivalry isn’t dead?
CHAPTER 35
I made the ferry and caught a red eye out of Southern California bound for the Midwest. I slept in fits and starts on the plane. My stomach was in ropes, my world spinning off its axis. I flagged a cab and arrived at the hospital just as the sun was pushing at the horizon. The sky was a marbled slate gray. The promise of a new day couldn’t have felt less authentic.
I checked into the hospital and bought some overpriced flowers from the gift shop. I found the elevator and made my way to Mr. X’s room. He was sleeping, small and frail in the hospital bed. Machines beeped loudly as they monitored his vitals and fed him oxygen to keep him alive. Cathy was loyally asleep in a window nook that doubled as a bed, if you could call it that. I quietly took a chair near Mr. X’s bed and tried not to disturb either of them. My thoughts went back to how I’d left things in shambles in Catalina. A nurse came in to check on Mr. X, rousing Cathy from her sleep. She greeted me warmly with a hug, as was her superpower.
“How’s he doing?” I asked.
“He’s hanging in there… barely,” she said, fighting back the emotions of the inevitable. “I’ve been here all night. If you wouldn’t mind taking a shift, I’d love to run home to shower and change my clothes.”
“Of course,” I replied. I felt dirty myself from the red eye, but I didn’t want to complain. Anyway I had left all my stuff behind in Catalina, so I had no way to freshen up even if I wanted to.
“Oh, and just so you aren’t surprised, Mr. X’s daughter, Mary, is on her way.”
“I thought they weren’t speaking anymore?” I asked.
“They weren’t. But death has an odd way of reuniting people,” she said. Homespun Midwest wisdom. “See you in a bit,” she said, already halfway out the door.
Without opening his eyes, the old man said in a gravelly voice, “I thought you’d never make it.”
I let out a cathartic laugh. “You ruined my vacation,” I said.
“I know, I’m sorry. But we still have one lesson left.”
“Wouldn’t miss it for the world, Mr. X,” I said, faking a brave smile.
“I don’t have a lot of breaths left. But there are a few vital lessons I still need to give you.” He paused to let his oxygen catch up. Even talking was a chore for him now.
“Mr. X, we don’t need to…”
“Stop. Please, this is important to me,” he said. “This lesson will give context to all our past talks.”
“Yes, sir,” I said. It seemed like a futile endeavour. He was too weak to teach and I wasn’t in any mood to learn.
“The ancient Greeks famously said that the revisiting of definitions is the beginning of wisdom,” he said. He must have been thinking about this session with an opening like that. “I realized that we never defined capital allocation in our early lessons.”
“What is your definition of capital allocation, Mr. X?” I said. Might as well be a good sport and support the last wishes of my dying friend.
“At the most basic level, it’s how you decide to spend money. But it’s even deeper than that. Successful capital allocation means converting inputs like money, materials, energy, ideas, human effort, into more valuable outputs. It’s that transformation process.”
“That just sounds like business to me,” I said.
“You’re right. It reminds me of a joke,” he said. Do we have time for jokes? He stopped to sip some water from a plastic straw inserted into one of those weird yellow hospital jugs.
“Please, do tell,” I said.
“Two young fish swim by an older fish,” he wheezed. “The elder says, ‘Morning boys, how’s the water?’ The two younger fish swim on. Eventually one looks at the other and says, ‘What the hell is water?’” With this he let out a surprisingly loud laugh that sent him coughing. I couldn’t help but smile at how he cracked himself up, even at Death’s door.
“You see,” he said when he’d recovered. “Capital allocation is baked into all of business, every decision. Like water surrounding the fish--we don’t notice until it’s pointed out to us.”
“While we’re backtracking a little, can I ask a question I should have asked months ago?” I said.
“Absolutely.”
“What the hell is capital anyway? Is it just money? Or machinery? Or buildings? I feel like I’ve heard it used in so many different contexts; I’m not even sure how to define it.”
“That’s a very good question, Nicky,” he said. “It is a foundational term that is often misunderstood. People use the term to describe so many different things, it makes the definition become fuzzy and sloppy. The Inuits have fifty different words for snow, yet we suffer with one word that strains to explain a wide variety of things. You’ll laugh, but I’ve invented my own word to help my thinking.”
“What is it?” I asked.
“Before we get into my made-up words, let me tell you my definition of capital,” he said. “I view capital as goods, both tangible and intangible, that were previously produced that aren’t directly satisfying a human need yet. Capital is whatever bits, atoms, or energy that are available to eventually produce something that delights a customer. An example might help?”
“Yes, please.”
“Let’s pretend you live alone on a deserted island,” he said. I was happy to see that teaching was having a small revitalizing effect on him. “You can either pick berries to eat, or sit and stare out at the ocean. You need berries to survive, but you also like sitting on your butt and taking in the surf.”
“Yes, I do,” I said. “Probably more than most.” He just smiled.
“You could decide to forgo picking berries for a few hours and use that time to fashion a stick that would pick berries faster. You have to go without berries for a while to create this stick. You’re delaying gratification today in favor of a better future. By the way, the same principles on the desert island apply to an individual company, a family, a nation, or a global economy. The exercise of foresight, restraint of appetites, anticipation of future demand, a lowering of time preferences, delaying consumption today so you can consume more in the future--they all apply.”
“I think I’m following,” I said. “Keep going.”
“That stick which allows you to gather more berries is capital. It’s doesn’t directly satisfy your need to eat, but it delights you with more berries. Without capital, we’d all be living hand-to-mouth, barely surviving. So the more we save as a society and invest in our capital, the more sticks we create, the more berries we can all have. Make sense?”
“Yes,” I said.
“Here’s where the idiot Ph.D. economists get it wrong,” he said. Still a feisty rebel until the end. “In their fancy equations and physics envy, they assume capital is this big blob of clay that can be reshaped at a moment’s notice. The term they use is homogenous--like homogenized milk. They assume your stick can be magically transformed into a wheelbarrow to haul your berries.”
“That clearly seems wrong.”
“It’s dead wrong,” he agreed. “In reality, capital is a historic relic of previous efforts. It’s usually crafted for a specific purpose and becomes a sun
k cost if it has no alternative use. I can’t take a milkshake machine out of a restaurant and chop down a tree with it. Capital is mostly fixed and sunk, so it’s vitally important that it’s deployed wisely. Misallocated capital is of no use to anyone. It is a loss to the entrepreneur, the investor, and the consumer.”
“Yes, I see,” I said. “What was your made up term, before we get too far and forget?”
“You’re going to laugh,” he said. “The word is fapital, which is a portmanteau of financial and capital. Financial, capital… fapital. Fapital represents the ownership claim to real capital and productive capacity. I would put money, stocks, bonds, deeds, things like that in the fapital bucket. Fapital isn’t the same as machinery or inventory, or even intangibles like ideas and patents. Those are capital, and they’re used for the eventual production that meets human wants and needs. Fapital is an abstraction. It’s the claim to the means of production.”
“I’ll have to think about that one, but I like the idea of segmenting the real from the abstract.” I wanted to stick with this concept, but there was something I needed to ask Mr. X while he was still with it. “There’s something I just have to know: why is capital allocation so important to you? It seems like an obscure topic to get excited about.”
He stared straight forward, letting out raspy breaths while he gathered his thoughts. “Have you ever seen those Russian stacking dolls?”
“Sure.”
“It’s like those dolls. Layer inside of layer. Or the water surrounding the fish. Let me see if we can work through the different layers so you can get a better understanding of what I mean. First, who has a stake in the success of a business?”