On a recent trip, I downloaded the book It to my Kindle. Light reading, right? The book quickly drew me in. I hadn’t read fiction in a long, long time. The most recent issues of The Economist gathered dust while I plowed through Stephen King’s novel.
This was a change. For the past couple of decades, I’ve considered all of these activities to be a sub-optimal use of my time:
- sitting still
- reading fiction
- long walks
The thought I had was this:
What good is going to come out of any those activities? I should be studying, exercising, or doing something that will result in improvement for myself, family, or our nest egg.-Misguided Me
The nest egg part is what I’ve been thinking about lately.
I enthusiastically subscribe to Charlie Munger’s philosophies. Charlie Munger is Warren Buffett’s investing partner. Everyone knows Buffett, but Charlie is the big brain behind the operation.
Buffett even gave Munger credit for Berkshire Hathaway’s success in the 2014 shareholder letter:
What most of you do not know about Charlie is that architecture is among his passions. Though he began his career as a practicing lawyer (with his time billed at $15 per hour), Charlie made his first real money in his 30s by designing and building five apartment projects near Los Angeles. Concurrently, he designed the house that he lives in today – some 55 years later. (Like me, Charlie can’t be budged if he is happy in his surroundings.) In recent years, Charlie has designed large dorm complexes at Stanford and the University of Michigan and today, at age 91, is working on another major project.
From my perspective, though, Charlie’s most important architectural feat was the design of today’s Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.
How do you figure out which businesses are wonderful and which ones aren’t? It’s complicated. Munger likes to look at deep trends, figure out where the world is going, and then consider which businesses will benefit. See Munger’s famous Coke thought experiment.
You must also be able to apply mental models to the world. Perhaps most importantly, you also have to read. A lot.
Wayne Gretzky famously said something like this:
I don’t skate to where the puck is, I skate to where it’s going.
Same thing with growth investing. You figure out where the world is going and put your money there.
For most of my adult life, I’ve enjoyed thinking about the future and how to profit from it. There will be a lot of money thrown at:
- Augmented Reality: Watch Apple.
- Electric vehicles: An internal combustion engine is a Rube Goldberg machine compare to the elegant simplicity of an electric motor. The inflection point on the bottom part of the S-Curve is already here.
- Heat pumps: Transportation isn’t the only thing going electric.
- Small modular reactors: Something has to provide the power for all of the EVs and heat pumps. Nuclear power doesn’t have to be scary.
- Transportation as a service: I thought autonomous cars would be widespread by now. It turns out that the problem is a very hard nut to crack, but I’ll bet the technology is common by 2030. Waymo may not be far away now…
Also, consider some of the base technologies that are fueling the future:
- Lithim-ion batteries: There would be no smart phone, drones, or Teslas without this battery technology. eVOTLs are next.
- Rocket reusability: SpaceX is reusing its first stages and every other rocket company is trying to duplicate its success. Reusability will bring down the cost to access space. What new businesses will be created as a result?
- Artificial intelligence: I don’t even know where to start with this one, so I won’t. I’ll only say that Google is pretty good at it…
So, if you think about this stuff long enough, it gives you investing ideas. It’s not easy though. Just because Technology X is going to rule the world doesn’t mean you can figure out which company is going to make the most of it. And even if you do pick the winner, no empire lasts forever. Today’s world beater is tomorrow’s afterthought.
Investing From Here On Out
For the longest time, I enjoyed reading about the future and I still do, but now I feel it waning a little. Reading fiction is a lot of fun. So are long, mindless (and mindful) walks. Most movies and TV shows still suck, so I’m OK without that screen in my life. I stilll find it difficult to sit still.
So, I’m changing things up a bit. I’m not looking for any more syndication deals. I probably won’t put any more money into individual stocks or exotic private companies. Index funds, which you don’t have to think about at all, will get most of our new money.
Other random thoughts:
- No bonds: I don’t think we’ll ever own a bond. This is a luxury Mindy and I can afford since we oversaved. Additional reading over at Go Curry Cracker.
- I’m not going to sell for the sake of selling: We have large investments in Tesla, Alphabet (Google), and Amazon. (See our portfolio here) I still believe in the long-term prospects of these companies, so I’m holding on. Also, capital gains.
- Unintentional dividend investor: I’ve always preferred growth investing over dividends. However, (and again because we oversaved), I’m not sure we’ll ever have to sell any shares. The dividends may be enough to fund our existence from here on out.
- I still think I’m living a dream: When I was a kid, I thought that $1,000,000 was an insane amount of money. “I’ll never have that!” Before the world went bonkers, we were over $5,000,000 and are now approaching it again. It doesn’t feel real. Life is good.
- Money will never change me: I’ll always mow my lawn, clean my toilets, and change the cars’ oil (at least until I get an EV). One of the greatest luxuries is having a healthy body that allows you to get through most of life without relying on others. I’m going to stay Active AF until I can’t.
I’d be curious to hear from others. Have your investments or philosphies around investing changed over time? Does more money mean that you get a little crazier or do you tighten up? How will your portfolio change as you get older?
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