The Gods Envy Us

One of the challenges with investing is when to admit you were wrong. If your goal as a stock picker is to do better than just investing blindly in everything on offer (an index). History is, at least, compelling enough to know that outperforming in 60% of your decisions will raise you to the status of demigod if people give you the credit. But if you underperform more than 50% of the time? If you underperform the benchmark over an extended period? How long is long enough to take the blame? Performance is noisy, which gives lots of space to hide. Going to Zero ends the discussion, but lots of companies stutter along. Max Plank reminds us that Science progresses one funeral at a time. Death is a feature, not a glitch. So how do we know when it is time to let go of beliefs? How do we ensure that we are not so tied to our stories, that we serve them, rather than them serving us? How do you maintain a sell discipline?

"They envy us because we're mortal, because any moment may be our last. Everything is more beautiful because we're doomed."

Surviving the Stages

Few businesses plan to die (although most new businesses do). In that way, legal people (a company has legal rights and is subject to obligations) have the ultimate advantage over real people. Given that the most powerful investment tool is time, even modest real returns will compound into the gargantuan with a long enough time frame. The key is survival, even if the nature of the business changes dramatically. Nokia was founded as a pulp mill. Berkshire Hathaway (Warren Buffett’s Engine) started as a textile factory. Wells Fargo, the bank, started life along with American Express carrying deliveries in Stage Coaches. The two key elements besides what they do, that most real people tend not to think about, that are essential for the survival of legal people are (1) Capital, and (2) The Container. A good business is not a good business if it can’t survive. It doesn’t matter how good the idea, if it can’t pay its bills when they come due, or survive periods of disruption and destruction. If you want to build wealth, the key ingredient is capacity for time.

1879 Wells Fargo Stagecoach