Building Arks, Rather Than Trying to Predict The Rain
Guy Spier is the author of the excellent book The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment, an exploration of his development as a value investor (and as a human). Guy’s book is unique because far from being a book on how to pick stocks, it is really a book about finding yourself and living your life in a way that is authentic and true to who you really are.
The connection that Guy draws between successful investing and truly knowing yourself resonated with me. In a recent interview I discussed the importance of aligning investment strategy with your own personality:
“One thing I’ve come to as an investor, is recognizing that there are a lot of ways to make money in the market. There are a lot of investment approaches and philosophies that can do very well, but all of them test the investor in one way or another. Therefore, it’s important for you to figure out how to align your investment philosophy with your own personality – so that when the investment philosophy inevitably tests you, you’re the sort of person who will pass the particular types of tests required to successful manage your investment strategy.”
Guy’s book describes how he had to remove himself, indeed move to Switzerland, to fully reach his potential as an investor. This doesn’t mean everyone needs to do this. But for Guy, an authentic examination of himself made him realize that the radical step of moving was right for him.
A couple months ago, Guy reached out to my colleague Arif to meet for coffee while he was in town. After the meeting, Guy sent me and Arif a nice thank you note (he’s a big fan of thank you notes), which included a bar of chocolate with a quote from Warren Buffett emblazoned across the label.
I love this quote (the chocolate was good too). Sometimes when we talk with clients about how we don’t try to predict the economy or the market we get strange looks that seem to say “then what am I paying you for?” We usually talk about how we focus on individual companies that have strong competitive advantages, but really we should just say:
“We’re building arks.”
Or more precisely, we’re looking to invest in arks. We don’t know when the rain will come. It sure would be nice to be able to predict the rain and maybe for some people, expending their time and resources in an effort to predict the rain fits their personalities. But for us, we know that ark building is our calling, not rain predicting.
Buffett uses the analogy of a moat to describe what he looks for in stocks. Arks might work as analogy for other people. Sometimes I’ve imagined investing as being like a wild, off-road race, in which our strategy is not to try to guess which route will be fastest, but instead to pick the vehicle that offers the best mix of speed and ruggedness, along with a great driver. Meanwhile most investors are look for shortcuts or flashy cars that offer turbo-charged engines, but always seem to spin out when the going gets rough.
Moats, off-road super cars, arks. They all have one thing in common. Rather then guess what is around the corner, they prepare themselves for the challenges ahead.
The rain is coming. We don’t know when. But it is always on its way. Away over the horizon, storms are brewing. Whether they come tomorrow or next year, or we see clear and sunny skies for the next five years, the storms will come.
Until then, we’ll build arks.
While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.
The information contained in this post represents Ensemble Capital Management’s general opinions and should not be construed as personalized or individualized investment, financial, tax, legal, or other advice. No advisor/client relationship is created by your access of this site. Past performance is no guarantee of future results. All investments in securities carry risks, including the risk of losing one’s entire investment. If a security discussed in this blog entry is owned by clients invested in Ensemble Capital’s core equity strategy you will find a disclosure regarding the security held above. If reviewing this blog entry after its original post date, please refer to our current 13F filing or contact us for a current or past copy of such filing. Each quarter we file a 13F report of holdings, which discloses all of our reportable client holdings. Ensemble Capital is a discretionary investment manager and does not make “recommendations” of securities. Nothing contained within this post (including any content we link to or other 3rd party content) constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instrument. Ensemble Capital employees and related persons may hold positions or other interests in the securities mentioned herein. Employees and related persons trade for their own accounts on the basis of their personal investment goals and financial circumstances.