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Great investors are investment philosophers (Link)
Think back to your education. Remember your university or secondary school days. What did you learn then that you still use today? Does any of it help you in your professional life? Many could claim that nothing they learned at university helps them at their job today. If you’re in finance how could your chemistry skills of calculating the polarization of sodium D1 help with investing?
If we think about this further many of us could claim the best skill we developed in university was how to solve problems. Famous mathematician, Carl Jacobi once said: “Invert, always invert.” He said that many complex problems can be solved if you invert them and think about the solution you want to find and then work backward to your current situation. When you do that, you often find the quickest and most effective solution to seemingly intractable problems. In mathematics and physics, this inversion technique is applied all the time, but seldom is it used when assessing business problems or new investment opportunities.
Research analysts and fund managers typically have been trained in finance and learned everything about financial statement analysis and know every little detail about the companies they cover. Many of these fund managers are interviewed on television and usually share their “wisdom” on why they love growth or income stocks or why they think rates will be hiked or not. Put another way, they talk their book. Are they good problem-solvers or are they just book smart?
How do people like Warren Buffett, Howard Marks or Benjamin Graham stand out? They don’t focus on any of these technical details. They think about the fundamental long-term drivers, and they have developed investment techniques that can adapt to a broad range of problems to understand the underlying market dynamics. These are investment philosophers.
Think back to your education. Remember your university or secondary school days. What did you learn then that you still use today? Does any of it help you in your professional life? Many could claim that nothing they learned at university helps them at their job today. If you’re in finance how could your chemistry skills of calculating the polarization of sodium D1 help with investing?
If we think about this further many of us could claim the best skill we developed in university was how to solve problems. Famous mathematician, Carl Jacobi once said: “Invert, always invert.” He said that many complex problems can be solved if you invert them and think about the solution you want to find and then work backward to your current situation. When you do that, you often find the quickest and most effective solution to seemingly intractable problems. In mathematics and physics, this inversion technique is applied all the time, but seldom is it used when assessing business problems or new investment opportunities.
Research analysts and fund managers typically have been trained in finance and learned everything about financial statement analysis and know every little detail about the companies they cover. Many of these fund managers are interviewed on television and usually share their “wisdom” on why they love growth or income stocks or why they think rates will be hiked or not. Put another way, they talk their book. Are they good problem-solvers or are they just book smart?
How do people like Warren Buffett, Howard Marks or Benjamin Graham stand out? They don’t focus on any of these technical details. They think about the fundamental long-term drivers, and they have developed investment techniques that can adapt to a broad range of problems to understand the underlying market dynamics. These are investment philosophers.
A lesson on compounding (Link)
Many young people find it very hard to stick with a long-term savings plan. For many, it’s likely your savings will trump your investment gains for the first couple of decades. And then, all of a sudden, your investment returns take over once you’ve built up a decent-sized nest egg.
Let’s pretend someone starts out saving 10% of their salary from age 25 to age 65. They start out making $40,000 and that salary grows at 3% a year (with inflation). Let also assume they earn a 6% annual return. Here is the math:
By 40, they have saved over $80,000 with the overall balance growing to $125,000 from investment growth. This means that 65% of the balance comes from saving alone. As years go by that ratio begins to flip.
By age 65, the contributions from saving equal 31% of your portfolio and 69% come from your investment growth on 6% annual growth. Small gains can add up over time even though it may not feel like it at the moment.
America's favorite supermarket: Wegmans (Link)
Less is more: Chick-fil-A (Link)
Founded in 1967 by entrepreneur Truett Cathy, Chick-fil-A’s signature item has been its breaded chicken-breast sandwich and its relatively simple menu is what makes it stand out. Five decades later, the closely held company this year is poised to become the third-biggest U.S. restaurant chain by sales. Sales from Chick-fil-A’s restaurants have tripled over the past decade, reaching $10.2 billion in 2018.
What’s their secret? It's their slow and steady, quality over quantity approach. This combined with their focus on ensuring all customers, employees, and restaurant operators are treated with care and respect. Among U.S. restaurants that serve chicken, Chick-fil-A’s market share rose to 33% last year from 18% in 2009, while the market share of Yum Brands Inc.’s KFC chain fell to 15% from 29% in that time.
Since, 2015, Chick-fil-A has been the top-rated fast-food restaurant on the American Customer Satisfaction Index. This is in large part due to their restaurant operators who help assure consistent food quality and service. The average McDonald’s franchisee owns half a dozen stores while most of Chick-fil-A franchisees own one.
America's favorite supermarket: Wegmans (Link)
Wegmans Food Markets is a Rochester-based regional grocery chain with just over 90 stores and reported $8.3 billion in sales. Founded in 1916, this family-owned company is under the leadership of the 3rd and 4th generations of the Wegman family. The spirit of family extends to its customers, employees and into the community. It's not surprising that it's the most beloved supermarket in the US. According to the Harris Reputation Ranking survey, Wegman’s has the best corporate reputation among visible US businesses. In 2019 Wegmans beat out # 2 ranked Amazon.
There are many things that Wegmans does well but most of all they believe in putting employees first. They believe that in order to be a great place to shop, they must first be a great place to work.
