Have faith in the heroes
I can hire a faceless group of suits to invest my money. They call it “allocating capital,” and that sounds really intelligent. They will arrange and sort data to look for patterns, and then devise a trading strategy to exploit those opportunities as they present themselves. Over time, the returns accumulate, and the price chart looks like a jagged mountainside—up and to the right, with the occasional drop or notch on the way up. I get my report in the mail every quarter, open up the envelope, look at the chart and the dollar value, then tidily fold up the sheet and tuck it away in the folder with all of the other quarterly reports. And I move on with my life.
In order to “reduce risk” I will hire several of these faceless groups of suits. The mountain charts will look slightly different, but the overall pattern will be the same. I have a separate folder for each set of statements, and they live next to each other in my study desk drawer. I pull them out at tax time and send them to my accountant. And I move on with my life.
Occasionally the numbers will drop and won’t bounce back. One quarter, two quarters, now three… and the numbers don’t seem to be coming up. The notch in the mountainside is getting larger and larger. All of a sudden I’m feeling less confident in this particular faceless group of suits, and I start seeking an alternative. If an ad catches my eye, or a friend recommends a “great guy” he works with, I might consider switching. And the process starts anew. We pass this bump in the road, and I move on with my life.
This is one way to do it.
It becomes automatic and soulless. Like the morning coffee you chug every day on the way to work, sitting in traffic, preoccupied with the problems of the day ahead, the pick-up of the kids after school, and don’t forget to swing by the dry cleaner on the way home. You drink the coffee by reflex, barely registering it as it passes your lips.
Do you remember the last time you really appreciated that morning cup of coffee? Because when you stop to truly enjoy it, that morning cup is magic in a mug.
I’ll admit that I am a finance nerd, but hear me out on this one. Have you ever stopped to consider the magic of investing in a company’s common shares?
You can own an actual piece of a company that you admire. A company that may have been founded generations ago halfway around the world. But now you can own a small piece of it. You are effectively hiring that company’s management to take care of the cash you invest with them.
Businesses aren’t static entities. They are living things, imbued with the spirit of their employees and leaders. They struggle. They adapt. They grow. They have cultures and personalities, which change over time. They stumble, and sometimes they fall. The proudest of them can decline and perish, and sometimes the ones left for dead miraculously rise from the ashes.
Being able to invest in a business is an amazing thing, and there is a soul and a spirit to doing it well, and caring about it.
When you think about it this way, it changes everything. I’m not passively buying stocks as commodities. I’m buying pieces of businesses. I’m building my empire.
Perhaps the most important element to investment success is sticking with your plan through the inevitable downturns. Owning shares in companies with leadership teams you believe in is a phenomenal way to do that. You’ll ride through highs and lows with them. If you made the right choices, you’ll need to demonstrate patience and faith in their ability to weather the storms. The same management team you admire will use their ingenuity to solve problems and adapt as their environment changes. Think of your own business and how many times you faced an uncertain outlook. How many times you had to pivot your strategy in response to changing conditions. But you made it through.
If you think about it like this, you’re not likely to be easily swayed in your opinion by financial news’ sensationalized clickbait headlines, linking to an article written by a reporter who has never run a business in their life.
The stock market is just a reflection of the business world you know so well. The faceless suits have it all wrong.
Did anyone expect Jeff Bezos to transform Amazon from an internet bookseller to a mammoth global retailer, a ubiquitous cloud software platform, a video and music service, and a grocery store?
Or Steve Jobs, resurrecting Apple from near death with the iPod, and eventually revolutionizing modern computing with the iPhone?
Remember Hurricane Katrina, when Walmart’s leadership and logistics proved more adept at getting supplies and provisions to New Orleans than the Federal freaking government, with all of its unlimited resources?
These management teams can be your partners. They find a way to survive and prosper.
They are the heroes. Invest in them. Forget the suits!
When you buy a share of a corporation, you’re recruiting their management team to manage your money for you. To find a way to prosper by maximizing long-term shareholder value. If they’ve proven the ability to do it in the past, you can have trust in them to continue to execute. Doesn’t that sound better than hiring a faceless suit to shuffle your money around while optimizing equations littered with Greek letters?
It’s not as complicated as the suits will have you believe.
The best investors are slowly building empires by investing in the heroes.