WHEN IT CAME TIME TO DECIDE WHAT I WAS GOING TO STUDY, I DECIDED TO GET MY DEGREE IN ECONOMICS.
READING THIS SINGLE BOOK HAS HAD MORE ACTUAL IMPACT ON MY LIFE THAN THAT ENTIRE DEGREE.
ALONG WITH BENJAMIN GRAHAM, WARREN BUFFETT, CHARLIE MUNGER, AND MANY OTHERS, PETER LYNCH’S
WISDOM SET ME UP TO RETIRE IN MY TWENTIES, SOMETHING I DIDN’T EVEN KNOW WAS POSSIBLE
WHEN I FIRST STARTED ON THIS JOURNEY.
PETER DIDN’T HAVE TO SHARE HIS WISDOM BUT HE DID, AND FOR THAT, I’M ETERNALLY GRATEFUL
TO HIM.
MOST PEOPLE SHOULD JUST CONTRIBUTE TO A LOW COST INDEX FUND LIKE THE S&P 500 ON A CONSISTENT
BASIS, FORGET ABOUT IT, AND JUST LIVE THEIR LIFE.
HOWEVER, IF SOMEBODY WERE INTERESTED IN LEARNING MORE ABOUT INVESTING AND I HAD TO RECOMMEND
ONLY ONE BOOK, IT WOULD HAVE TO BE ONE UP ON WALL STREET BY PETER LYNCH.
THE FOLLOWING ARE SOME OF MY FAVORITE LESSONS FROM THE BOOK:
ECONOMIC PREDICTIONS ARE GARBAGE.
AND MOST QUOTE UNQUOTE EXPERTS HAVE NO IDEA WHAT THEY’RE TALKING ABOUT.
GOING BACK TO MY DEGREE IN ECONOMICS, I CONSIDER IT LARGELY USELESS.
THERE HASN’T BE A SINGLE BUSINESS OR INVESTING DECISION I’VE EVER MADE BASED ON SOME BROAD
ECONOMIC FACTOR.
CONSIDER, FOR A SIMPLE EXAMPLE, THIS YOUTUBE CHANNEL.
WHEN I STARTED THIS CHANNEL, I DID NOT THINK ABOUT WHETHER I SHOULD START OR NOT BASED
ON WHAT THE M1 MONEY SUPPLY WAS OR SOME OTHER NONSENSICAL FACTOR.
I THOUGHT A LOT ABOUT HOW MY VIDEOS SUCKED AND WHAT I COULD DO TO MAKE THEM SUCK A LITTLE
LESS OVER TIME.
THIS IS HOW EVERY REAL BUSINESS OWNER THINKS, AND AS EXPLAINED BY BENJAMIN GRAHAM, IF YOU’RE
AN OWNER OF A STOCK, YOU ARE A BUSINESS OWNER.
NO GOOD BUSINESS OWNER THINKS ABOUT NEXT YEAR’S M1 MONEY SUPPLY, THEY THINK ABOUT THINGS THAT
ARE RELEVANT AND ALSO IN THEIR CONTROL LIKE HOW THEY CAN IMPROVE THEIR PRODUCT AS AN EXAMPLE.
FURTHERMORE, NOT ONLY ARE MOST ECONOMIC DATA USELESS, BUT THE ONES THAT COULD BE USEFUL
ALSO HAPPEN TO BE ALMOST IMPOSSIBLE TO CONSISTENTLY PREDICT CORRECTLY.
WE HAVE QUOTE UNQUOTE EXPERTS PREDICTING CRASHES EVERY YEAR FOR A DECADE STRAIGHT, AND ONCE
IT DOES FINALLY HAPPEN, THEY TELL US, “I TOLD YOU SO.”
JOHN KENNETH GALBRAITH SUMMARIZED THIS PERFECTLY.
HE SAID, “THERE ARE TWO KINDS OF FORECASTERS: THOSE WHO DON’T KNOW, AND THOSE WHO DON’T
KNOW THEY DON’T KNOW.”
THESE SO-CALLED EXPERTS AND ECONOMISTS ALONG WITH THEIR PREDICTIONS SHOULD LARGELY BE IGNORED
OR SIMPLY TREATED AS ENTERTAINMENT AND ENJOYED FOR THEIR OVERLY DRAMATIC FORTUNE TELLING.
IN FACT, THIS IS PROBABLY DISRESPECTFUL TO FORTUNE TELLERS, BECAUSE A GOOD FORTUNE TELLER
WILL OVER TIME PICK UP ON THE BASIC PATTERNS OF HUMAN PSYCHOLOGY, AND WILL THEREFORE HAVE
A MUCH HIGHER ACCURACY OF PREDICTING THE FUTURE THAN AN ECONOMIST.
KNOW WHAT YOU OWN.
YOU HAVE AN EDGE.
I CONSTANTLY FIND MYSELF HAVING AN URGE TO DABBLE IN THINGS I DON’T UNDERSTAND.
IT CAN ACTUALLY BE QUITE IRRITATING AND REQUIRES A GOOD AMOUNT OF SELF-AWARENESS SO THAT I
DON’T GIVE IN.
YOU SHOULD BE ABLE TO EXPLAIN TO A CHILD RELATIVELY QUICKLY AND EASILY WHAT EVERY BUSINESS THAT
YOU OWN DOES.
IT’S QUITE FASCINATING TO SEE PEOPLE OWN BUSINESSES WHERE THEY HAVE NO IDEA WHAT THE
BUSINESS ACTUALLY DOES, BUT IT’S MUCH MORE COMMON THAN YOU’D THINK.
LIKE WARREN BUFFETT HAS REITERATED MANY TIMES, THE SIZE OF YOUR CIRCLE OF COMPETENCE DOESN’T
MATTER, ONLY THAT YOU STAY INSIDE IT.
LIKE I ALREADY SAID MOST PEOPLE SHOULD PROBABLY JUST INDEX, BUT IF YOU’RE GOING TO OWN INDIVIDUAL
STOCKS, YOU HAVE TO ASK YOURSELF A SIMPLE, COMMON SENSE QUESTION, “WHAT DO YOU BRING
TO THE INVESTING TABLE THAT OTHER PEOPLE DON’T?”
THIS IS THE ONLY WAY YOU COULD CREATE ANY SORT OF ADVANTAGE.
IT CANNOT SIMPLY BE LOOKING AT A RATIO LIKE PRICE TO EARNINGS, EVERYBODY HAS INSTANT ACCESS
TO THAT.
IT CANNOT BE ANALYZING SOME BALANCE SHEET IN SOME SIMPLISTIC WAY, AGAIN, ANYONE CAN
DO THAT.
YOU DON’T EVEN NEED A HUMAN TO DO IT.
EVEN A SPREADSHEET CAN AUTOMATICALLY CALCULATE THOSE VALUES.
YOU HAVE TO BRING SPECIAL INSIGHT THAT MOST PARTICIPANTS IN THE MARKET LACK.
OTHERWISE, THERE’S NO REASON TO BUY INDIVIDUAL STOCKS, AND ONE SHOULD SIMPLY INDEX.
BUT LET ME GIVE YOU AN EASY EXAMPLE OF WHAT I MEAN BY SPECIAL INSIGHT, AN EDGE THAT I
COULD POSSIBLY BRING TO THE MARKET.
I’VE BEEN USING ADOBE SOFTWARE FOR ABOUT TWO DECADES NOW.
THAT IS AN INCREDIBLE EDGE.
LOOKING AT 13F FILINGS WITH THE SEC, I FIND THAT A FAMOUS INVESTOR, CHUCK AKRE, ALSO HOLDS
SOME ADOBE IN HIS FUND.
NOW I HAVE TREMENDOUS RESPECT FOR CHUCK AKRE, I’VE IN FACT LEARNED A LOT FROM THIS MAN
AND I LOVE HIS PHILOSOPHY OF INVESTING.
IF CHUCK AND I WERE THE ONLY TWO PARTICIPANTS IN THE MARKET, HE WOULD WIPE THE FLOOR WITH
ME IN MANY ASPECTS, BUT THE NICE THING ABOUT INVESTING IS THAT I CAN PICK ONLY WHAT I WANT
TO COMPETE IN, WHAT WARREN BUFFETT REFERS TO AS “NO CALLED STRIKES.”
SO WHEN IT COMES TO ADOBE, EVEN FOR AN EXCEPTIONAL INVESTOR LIKE CHUCK AKRE, I GUARANTEE YOU
HE PROBABLY COULDN’T EVEN ARTICULATE THE DIFFERENCE BETWEEN WHAT ADOBE PREMIERE PRO
DOES AND WHAT ADOBE AFTER EFFECTS DOES.
IF YOU WERE TO ASK HIM WHAT PEOPLE USE ADOBE AUDITION FOR, HE PROBABLY COULDN’T TELL
YOU.
NOW HOW ARE YOU SUPPOSED TO DETERMINE THE MOAT, LET’S SAY, OF A BUSINESS WHEN YOU
DON’T EVEN REALLY UNDERSTAND WHAT THE PRODUCT DOES?
AND HOW ARE YOU SUPPOSED TO STAY IN THE LOOP WHEN YOU DON’T EVEN USE THE PRODUCT ON A
CONSISTENT BASIS?
AND THERE’S A BIG DIFFERENCE IN QUOTE UNQUOTE UNDERSTANDING BY READING ABOUT ADOBE IN AN
ANNUAL REPORT AS OPPOSED TO USING IT CONSISTENTLY FOR TWO DECADES AND HAVING IT AS PART OF YOUR
DAILY WORKFLOW.
IT’S LIKE A PERSON WHO HAS SPENT 20 YEARS IN A GYM AS OPPOSED TO A PERSON WHO HAS NEVER
STEPPED INSIDE A GYM BUT READ ABOUT THE DIFFERENT MACHINES THAT ARE SUPPOSEDLY IN THERE.
THOSE ARE TWO VERY DIFFERENT DEFINITIONS OF UNDERSTANDING, AND I WOULDN’T EVEN CONSIDER
THE LATTER UNDERSTANDING AT ALL.
WHY IS IT THAT I PAY ADOBE TOO MUCH MONEY THAT I WOULD LIKE TO STOP PAYING AND I CAN’T?
IF THE MOAT STARTS TO DIMINISH, I’LL BE ABLE TO SEE IT ALMOST INSTANTANEOUSLY BECAUSE
I’M AROUND IT EVERY DAY, BUT WHEN WILL THE NEWS GET TO CHUCK AKRE AS THE NUMBERS SLOWLY
TRICKLE INTO THE QUARTERLY REPORTS?
THESE ARE THE SORTS OF QUESTIONS THAT WILL GIVE YOU AN EDGE, NOT SIMPLY DOING A LITTLE
MATH TO GET TO THE RETURN ON INVESTED CAPITAL OR THE MARGINS ON ADOBE AND CONCLUDING THAT
SOMEHOW, FOR SOME REASON, ADOBE SEEMS TO BE A GREAT BUSINESS.
NOW MOST QUOTE UNQUOTE PROFESSIONAL INVESTORS HAVE NOTHING IN COMMON WITH SOMEONE LIKE CHUCK
AKRE.
CHUCK IS CONSIDERED THE CREME OF THE CROP.
MOST PROFESSIONAL INVESTORS ARE IN FACT WORSE THAN USELESS MAKING MILLIONS IN FEES TO UNDERPERFORM
A SIMPLE CLICK ON A BUY BUTTON FOR AN INDEX.
WHAT’S EVEN MORE IRRITATING IS HOW THEY CALL THEMSELVES “SMART MONEY.”
THERE’S NOTHING SMART ABOUT TRYING TO TRULY UNDERSTAND AND KEEP UP WITH ADOBE THROUGH
ADOBE’S QUARTERLY AND ANNUAL REPORTS.
IN FACT, YOU CAN THINK OF MOST OF THESE CHARLATANS AS A BUNCH OF VIRGINS PORING OVER FEMALE ANATOMY
CHARTS ALL DAY THINKING THEY’RE SOME SORT OF MODERN DAY CASANOVAS.
I’LL GIVE YOU ANOTHER EXAMPLE.
I WAS RECENTLY LISTENING TO AN INTERVIEW WITH BRUCE GREENWALD, A MAN WIDELY CONSIDERED TO
BE ONE OF THE BIGGEST INVESTING INTELLECTUALS.
IN DESCRIBING ADOBE IN A SINGLE SENTENCE, HE SAID AND I QUOTE, “ADOBE DOES FONTS AND
VIDEO PROCESSING.”
ANYBODY WHO HAS USED ADOBE PRODUCTS FOR EVEN A MONTH COULD EASILY TELL THAT BRUCE HAS NO
IDEA WHAT HE’S TALKING ABOUT.
NOT A SINGLE PERSON WHO ACTUALLY USES ADOBE PRODUCTS WOULD DESCRIBE ADOBE AS, “DOING
FONTS AND VIDEO PROCESSING.”
AND AGAIN, PLEASE REMEMBER, THIS IS A MAN THAT TAUGHT PROBABLY THE MOST FAMOUS CLASS
ON INVESTING IN THE WORLD, TAUGHT THE LIKES OF LEGENDARY INVESTORS LIKE LI LU, AND IS
HEAVILY ENDORSED BY PEOPLE LIKE WARREN BUFFETT.
THIS IS NOT TO BE DISRESPECTFUL TO BRUCE.
ON THE CONTRARY, BRUCE IS ONE OF THE SMARTEST PEOPLE IN THE WORLD.
THE POINT THAT I’M TRYING TO MAKE HERE IS THAT EVEN THE SMARTEST PEOPLE IN THE WORLD
THAT HAVE DEDICATED THEIR ENTIRE LIVES TO BUSINESS AND INVESTING ARE JUST AS OUT OF
TOUCH AND HAVE NO IDEA WHAT THEY’RE TALKING ABOUT WHEN IT COMES TO SOME OF THE BIGGEST
SOFTWARE COMPANIES IN THE WORLD FOR EXAMPLE.
NOW TO BE FAIR, “DUMB MONEY” ALSO MAKES UNNECESSARILY STUPID MISTAKES OFTEN HAVING
TO DO WITH TEMPERMENTAL ISSUES FOR EXAMPLE, BUT IT’S WORTH REITERATING THAT “SMART
MONEY” ISN’T AS SMART AS SOME PEOPLE MAKE IT OUT TO BE, AND “DUMB MONEY” DOESN’T
HAVE TO BE AS DUMB AS IT SOMETIMES IS.
YOU PROBABLY HAVE AN EDGE IN AN ISOLATED FIELD THAT COULD GIVE YOU AN ADVANTAGE WHETHER IT
BE RELATED TO YOUR WORK, OR HOBBIES, OR SOMETHING ELSE.
JUST THINK OF SOMEONE WHO’S A GAMER, FOR EXAMPLE, AND HOW MUCH OF AN ADVANTAGE THEY
WOULD HAVE IN THE REAL UNDERSTANDING OF GAMING TRENDS COMPARED TO SOME OUT OF TOUCH 70-YEAR-OLD
ON WALL STREET READING AN ANNUAL REPORT AFTER THE SHIFTS HAVE ALREADY TAKEN PLACE.
IT IS IMPORTANT TO REMEMBER, HOWEVER, THAT ONE SHOULD BE CAREFUL TO NOT WASTE THIS EDGE
WITH NOT BEING ABLE TO MANAGE EMOTIONS, STRAYING OUT OF ONE’S CIRCLE OF COMPETENCE, NOT UNDERSTANDING
THE VERY BASICS OF ACCOUNTING, PAYING ANY PRICE FOR A BUSINESS AS LONG AS IT’S A GOOD
BUSINESS, AND MANY OTHER COMMON MISTAKES.
THERE’S ALWAYS SOMETHING TO WORRY ABOUT.
ALONG WITH THE DOOMSDAY ECONOMISTS, THE MEDIA DIRECTLY PROFITS FROM CAUSING DAILY ANXIETY
WITH THEIR HEADLINES.
IN FACT, IT’S BASIC PSYCHOLOGY THAT PEOPLE HATE LOSING MORE THAN THEY LIKE GAINING, SO
THE HEADLINES TELL US DAILY THAT THE WORLD IS ENDING AND WE MUST CLICK TO FIND OUT WHY
SO THAT THEY CAN GENERATE ADVERTISING REVENUE.
THIS IS WHY IT’S IMPORTANT TO READ HIGHER QUALITY MATERIAL AND ESPECIALLY HISTORY, BECAUSE
IT PUTS IT ALL IN PERSPECTIVE.
IF YOU LOOKED AT THE PANDEMIC RHETORIC, FOR EXAMPLE, YOU’D THINK THAT THIS WAS THE WORST
THING THAT HAD EVER HAPPENED AND THE WORLD WAS COMING TO AN END.
WELL, OF COURSE A SIMPLE GLANCE AT MODERN HISTORY SHOWS US THAT THERE WAS LITERALLY
A WORLD WAR JUST A LITTLE WHILE AGO WHERE A NUCLEAR BOMB WAS USED.
NOW I DON’T KNOW ABOUT YOU, BUT IF LONG-TERM INVESTING CONTINUED JUST FINE WITH THAT, I’M
NOT SURE THAT I WOULD PUT THIS PANDEMIC IN SOME CATEGORY OF, “OH MY GOD, THIS IS THE
WORST THING THAT’S EVER HAPPENED.”
CONSUMING HISTORY REGULARLY FROM HIGH QUALITY SOURCES IS PROBABLY ONE OF THE BEST THINGS
YOU CAN DO IN GENERAL BUT ALSO FOR YOUR INVESTING ABILITY, MUCH BETTER THAN BUILDING IMAGINARY
DISCOUNTED CASH FLOWS IN EXCEL ALL DAY.
STOCKS GO UP AND DOWN.
IF YOU CAN’T HANDLE IT, DO NOT BUY STOCKS.
PETER LYNCH USED TO SAY THAT THE MOST IMPORTANT ORGAN IN INVESTING IS THE STOMACH NOT THE
BRAIN.
SOME PEOPLE JUST CAN’T HANDLE IT FOR WHATEVER REASON AND GIVE INTO PANIC AND ABANDON THEIR
ENTIRE PLAN AT THE FIRST SIGN OF TROUBLE.
IF THAT’S THE CASE, AGAIN ONE SHOULD FOLLOW AN INDEXING APPROACH OR IF EVEN THAT’S TOO
MUCH, ONE SHOULD SIMPLY AVOID STOCKS COMPLETELY.
IT’LL BE DETRIMENTAL TO ANY LONG-TERM FINANCIAL HEALTH, BUT IT’S PROBABLY AT LEAST BETTER
THAN PSYCHOTICALLY BUYING AND SELLING AT EXACTLY THE WRONG TIMES.
TO AN INVESTOR WHO KNOWS WHAT THEY’RE DOING, VOLATILITY IS A GREAT THING.
IF YOU LIKED A STOCK AT $100 AND HAD A GOOD REASON WHY YOU THOUGHT IT WAS A GOOD INVESTMENT,
WHY WOULDN’T YOU LIKE IT EVEN BETTER AT $70?
IT SIMPLY ALLOWS US TO BUY MORE FOR EVEN CHEAPER AND MAKE EVEN MORE MONEY.
THE PROBLEM USUALLY STEMS FROM PEOPLE PANICKING BECAUSE THEY DIDN’T HAVE A GOOD REASON FOR
BUYING IT IN THE FIRST PLACE, AND NOW THEY DON’T KNOW WHAT TO DO WITH IT.
IT’S EASY TO OBSERVE SOMETHING SIMILAR WITH EXERCISE.
IF GETTING BETTER AT PULL-UPS WERE LINEAR SO THAT THE FIRST DAY YOU GOT 1, SECOND DAY
YOU GOT 2, THIRD DAY YOU GOT 3, AND SO ON, I DON’T THINK ANYONE WOULD HAVE A HARD TIME
STICKING TO THEIR ROUTINE.
BUT YOU DON’T FIND THESE NICE LINEAR PROGRESSIONS WITH ANYTHING IN NATURE.
THE HARDEST PART IS STICKING TO THE PROCESS WHEN YOU FINALLY HIT 10 PULL-UPS, AND THEN
YOU DROP DOWN AND FOR A FEW WEEKS YOU SEEM TO BE GETTING 7S AND 8S.
STOCKS ARE NO DIFFERENT.
YOU HAVE TO PICK A PLAN THAT MAKES SENSE JUST LIKE YOU HAVE TO PICK A PULL-UP ROUTINE THAT
MAKES SENSE, BUT AFTER THAT BE ABLE TO TRUST THE PROCESS THROUGH THE UPS, DOWNS, AND SOMETIMES
LONG PLATEAUS.
DIWORSIFICATION
WHEN I PICKED TO STUDY ECONOMICS, I DID NOT PICK 99 OTHER FIELDS TO DIVERSIFY AND STAY
SAFE.
WHEN I PICKED TO LEARN TO PLAY THE PIANO, I DID NOT PICK 99 OTHER INSTRUMENTS JUST IN
CASE THE PIANO WENT OUT OF STYLE OR SOMETHING.
WHEN I STARTED THIS YOUTUBE CHANNEL, I DID NOT ALSO START 99 OTHER CHANNELS JUST IN CASE
THIS ONE DIDN’T WORK OUT.
THE CHANNEL’S ALREADY BAD ENOUGH, IMAGINE HOW BAD THINGS WOULD BE IF I DABBLED IN 99
OTHER CHANNELS AT THE SAME TIME.
I MEAN I CAN JUST GO ON AND ON, BUT THIS IDEA OF WEIRDLY EXTREME DIVERSIFICATION IS NOT
SOMETHING WE DO WITH ANYTHING ELSE WHEN WE STRIVE FOR GREAT RESULTS.
NOW DON’T GET ME WRONG, IF SOMEBODY’S DADDY LEFT THEM $100 MILLION AND THEY’RE
PLANNING ON CRUISING FOR THE REST OF THEIR LIFE, SURE, DIVERSIFY LIKE CRAZY.
EVEN 5% ON THAT IS 5 MILLION DOLLARS OF INCOME EVERY YEAR.
BUT FOR THE REST OF US WHO HAVE STARTED WITH NOTHING AND WANT TO BUILD IT INTO SOMETHING,
AND ESPECIALLY IF WE HAVE DEEP BUSINESS INTEREST AND ABILITY, AND IMPORTANTLY, GIVEN THAT WE’RE
NOT DELUSIONAL ABOUT THAT, IT’S INSANE TO DIVERSIFY LIKE THE GUY CRUISING THROUGH LIFE
WITH DADDY’S $100 MILLION.
THE PURPOSELESSNESS OF THAT TYPE OF LIFE HAS A DECENT CHANCE OF ENDING IN A DRUG OVERDOSE
FOR OUR QUOTE UNQUOTE LUCKY FRIEND, BUT I DIGRESS…
NOW OF COURSE IT IS THE CASE THAT EVERYONE ON WALL STREET MANAGING OTHER PEOPLE’S MONEY
ALSO DIVERSIFIES LIKE CRAZY.
IMAGINE MAKING $20 MILLION DOLLARS A YEAR, LET’S DO A SIMPLE 2% ON A BILLION DOLLARS
OF MANAGED MONEY, FOR BEING USELESS AND ADDING ZERO VALUE AND IN FACT, MOST OFTEN DESTROYING
VALUE.
OF COURSE YOU’RE NOT GOING TO WANT TO MESS THAT UP, SO YOU SIMPLY RECREATE A SLIGHTLY
SMALLER, DIFFERENTLY PACKAGED S&P 500 INDEX FOR YOUR CLIENTS AND MAKE YOUR $20 MILLION
A YEAR.
BUT APART FROM SITUATIONS LIKE THAT, AND AGAIN EMPHASIZING EXTREME BUSINESS INTEREST AND
ABILITY, AND THAT’S A BIG IF, WHY WOULD YOU DIVERSIFY?
IF WE TAKE BENJAMIN GRAHAM’S IDEA THAT YOU ARE A BUSINESS OWNER WHEN YOU OWN A STOCK,
HOW MANY BUSINESS OWNERS DO YOU KNOW IN REAL LIFE THAT OWN A HUNDRED BUSINESSES?
I DON’T KNOW A SINGLE GOOD BUSINESS OWNER LIKE THAT.
MOST ACTUALLY OWN JUST ONE OR MAYBE A HANDFUL AND DO PHENOMENALLY WELL IN LIFE.
AND GOING BACK TO THE IDEA THAT YOU HAVE TO BRING SPECIAL INSIGHTS TO THE MARKET TO HAVE
AN ADVANTAGE, HOW MANY COMPANIES CAN YOU REALISTICALLY DO THAT WITH?
I HAVE SPENT MY ENTIRE LIFE BEING FASCINATED BY BUSINESS, IT’S BASICALLY WHAT I DO ALL
DAY, AND I CAN BRING THAT ADVANTAGE TO MAYBE A HANDFUL OF COMPANIES.
THINK ABOUT THAT…
THERE ARE SOMETHING LIKE 50,000 STOCKS IN THE WORLD, AND AFTER A LIFETIME OF STUDY,
I ONLY HAVE A GOOD UNDERSTANDING OF MAYBE A HANDFUL OF THEM.
I BASICALLY UNDERSTAND 0% OF BUSINESS IN THE WORLD.
NOW GRANTED, I’M SETTING A HIGH STANDARD FOR WHAT UNDERSTANDING MEANS, BUT IT’S TO
AVOID SOUNDING LIKE BRUCE GREENWALD IF I WERE ASKED ABOUT BURLINGTON NORTHERN SANTA FE FOR
EXAMPLE.
IF I WERE DESCRIBING BNSF LIKE BRUCE DESCRIBED ADOBE, IT WOULD SOUND SOMETHING LIKE, “BNSF
DOES TRAINS, AND RAILROADS, AND STUFF LIKE THAT.”
IN FACT, THAT PROBABLY DESCRIBES BNSF BETTER THAN “DOING FONTS AND VIDEO PROCESSING”
DOES ADOBE.
ANYWAY...
SO NOW I’M SUPPOSED TO SELL MY ADOBE AND TAKE HALF OF IT AND BUY SOME CHINESE COMPANY
TO DIVERSIFY AND STAY SAFE, WHERE I HAVE NO EDGE, WHERE I DON’T UNDERSTAND THE BUSINESS
AS WELL AS OTHERS, WHERE I DON’T UNDERSTAND CHINA AS WELL AS OTHERS…
IT MAKES NO SENSE.
IN AN IMAGINARY SCENARIO WHERE YOU COULD BUY COMPANIES THAT ARE EQUALLY GREAT, AT EQUALLY
GREAT PRICES, WITH PERFECTLY EQUAL UNDERSTANDING OF THEM, SURE, WE COULD ALL JUST DIVERSIFY.
BUT THAT DOESN’T REALLY HAPPEN IN REAL LIFE.
IT’S EXTREMELY HARD TO FIND PHENOMENAL COMPANIES, AT RIGHT PRICES, AND THAT YOU ALSO HAPPEN
TO UNDERSTAND REALLY WELL AT THE SAME TIME.
THEREFORE, WHEN YOU DO GET RARE OPPORTUNITIES LIKE THAT, YOU MUST SEIZE THEM AND CONCENTRATE
HEAVILY INSTEAD OF WHAT PETER LYNCH WOULD CALL DIWORSIFYING.
IN SUMMARY, I THINK PETER LYNCH WAS PRETTY OPTIMISTIC ABOUT WHAT THE AVERAGE PERSON CAN
DO IN THE MARKET.
IT’S EASY TO LOOK AROUND AND SEE THAT MANY PEOPLE BUYING INDIVIDUAL STOCKS KEEP CAUSING
UNNECESSARY HARM TO THEMSELVES.
I DO MAINTAIN, JUST LIKE WARREN BUFFETT HAS REITERATED MANY TIMES, THAT MOST PEOPLE SHOULD
PROBABLY JUST BUY SOMETHING LIKE THE S&P 500 ON A CONSISTENT BASIS AND CALL IT A DAY.
BUT…
IF YOU FIND YOURSELF WAKING UP AND GOING TO SLEEP WITH THOUGHTS ABOUT DIFFERENT BUSINESSES
IN THE WORLD AND HOW THE WORLD OPERATES AND CHANGES, IF YOU’RE EXTREMELY CURIOUS AND
FIND YOURSELF ASKING EVERYONE AROUND YOU ABOUT PRODUCTS AND SERVICES THEY USE AND WHY THEY
LIKE THEM WHETHER THEY’RE SIX YEARS OLD OR SIXTY YEARS OLD, IF YOU GO TO CHIPOTLE
AND YOU’RE MORE EXCITED ABOUT OBSERVING HUMAN BEHAVIOR THERE THAN GETTING YOUR BURRITO,
THEN YOU MIGHT BE INFECTED BY A BUG THAT COULD MAKE YOU VERY WEALTHY.
NOW THAT SIMPLY NEEDS TO BE HONED THROUGH A LIFETIME OF ENDLESS CURIOSITY AND STUDY,
AND IF WE COULD ONLY PICK ONE BOOK TO KICK ALL THAT OFF WITH, FOR ME, IT WOULD HAVE TO
BE ONE UP ON WALL STREET BY PETER LYNCH.