More Stuff #3
On investing for decades, multiplying by 3 instead of 3.14, and building of the future by the PayPal Mafia
Hello everyone to the latest edition of More Stuff.
For those new, we give you three links to deep, reflective, and most of all, interesting pieces.
Let’s get into it!
Most people buy stocks with the goal of selling them at a higher price, thinking they’re for trading, not for owning. This means they abandon the owner mentality and instead act like gamblers or speculators who bet on stock price moves. The results are often unpleasant.
— What Really Matters? A memo by Howard Marks
1) Invest for the Decades, Not the Years
The tech stocks are again, the most sought after thing on Wall Street. Who can blame the people though? They see an opportunity, they pounce. When only seven companies are big tech companies, one has to shudder. If they don’t understand it, they might just be taken for a ride there. But with the demand for stocks, comes volatility.
In this case, the extreme ones. Tesla just dropped 63% two weeks ago and is up 10% on the earnings call with the investors. The entire Vanguard Total Stock Market fell by 1.08 % and bounced back 2% two days later. We are in the Correction now, they say.
This demonstrates the hidden beauty underlying a strategy like Just Keep Buying. Even in one of the worst equity markets in history, someone who bought over time would’ve done okay if they had just stuck with it.
Jerome Powell this, Jerome Powell that. We live in a time when each tweet of a person can move a stock. Well, guess what, that’s how it’s always been.
But, somehow, here we are. Stocks are near all time highs (even on an inflation-adjusted basis) and we have record economic activity in the U.S. The strategy works. Buying over time works. It’s not just backtests. It’s not just the Fed. It’s real.
2) Multiply by 3 Instead of Pi
The ‘94 Annual Berkshire Hathaway meeting was awesome.
For one it gave us a nice reminder to keep things simple. One doesn’t need to have all the information of the right things, but only the awareness to avoid a few big mistakes. Keep it simple instead of smart. Multiply by 3 instead of Pi (3.14).
Warren Says:
Some businesses are a lot easier to understand than others. And Charlie and I don’t like difficult problems. If something is hard to figure, you know, we’d rather multiply by three than by pi. I mean it’s just easier for us.
Charlie says:
Well, that is such an obvious point. And yet so many people think if they just hire somebody with the appropriate labels they can do something very difficult. That is one of the most dangerous ideas a human being can have. You don’t have to hire out your thinking if you keep it simple.
To end, Warren says:
And some people think that if you jump over a seven-foot bar that the ribbon they pin on you is going to be worth more money than if you step over a one-foot bar. And it just isn’t true in the investment world, at all.
3) The PayPal Mafia
The power of the sun in the palm of my hands… — Otto Octavius
We live in a world today created by these people.
Everything related to online business, payment methods, content sites, self-driving vehicles, job search platforms, twitter, and our method of cultivating a worldview was made possible at one singularity called: The PayPal Mafia.
This is the story of a group of employees and founders who harnessed the age of tech. And its capabilities. The group consists of Peter Thiel, Jawed Karim, Reid Hoffman, oh… and Elon Musk.
The story is wild, however, the future of these so-called outsiders is even wilder.
They would go on to build and angel invest in Youtube, LinkedIn, Twitter, SpaceX, Tesla, The Boring Company, Facebook, OpenAI, Airbnb, Slack, Uber and many other FinTech platforms. Give it a read!
Thanks for reading this week’s issue,
Speaking of a Mafia building the future through Tech, we have had two people from Omaha who did the same for the world of investing. Warren Buffett and Charlie Munger amassed an entire stadium packed to listen to their wisdom.
Year in, year out.
Next week we go through one of the underrated Annual Meetings of Berkshire Hathaway History.
See you next week!