I am a regular reader of Tim Price’s blog. I catch up with it in spurts. Towards the end of June, I had chanced upon his blog post recommending a talk by Morgan Housel in the microcapclub in September 2017. I had bookmarked to watch the video but the video is gone now. Taken off the internet. Sad. But, luckily, a transcript is available. It might take 30-35 minutes to read and absorb the 19-page transcript. But, it is probably a very good investment of your time. The title of the talk is ‘what other industries teach us about investing?’.
I would draw three lessons from his talk:
(1) One is on the Wright Brothers’ invention. The lesson he draws from it is this:
when innovation is measured generationally, results shouldn’t be measured
I am not disputing it. I am adding another lesson. If you notice, the Wright Brothers’ invention of the flying machine was ignored for a few years. But, it was happening. Therefore, the best inventions and scientific breakthroughs are the ones that are happenign off the prying eye. Most invesment value lurks there. It does not lie in the investments that are brought to your mailbox through investment newsletters.
Second lesson is finding that one investment is easier in hindsight! That is, one may have to invest in ten such ideas to find one that succeeds tremendously. Luck, diversification and an awareness of one’s maximum loss absorbing capacity are needed.
(2) Timing in investment matters. Looks like American Presidents’ ‘State of the Union’ addresses are great contrarian indicators. Buying in the years 1999 or in 2000 and holding the stock(s) or the Fund for ten years would have yielded a very different annual return than buying them at the beginning of 2003. See this tweet for some statistics on the best and the worst ten-year returns. In other words, buying with a margin of safety matters. That is a great insight, attributed to Ben Graham, from the talk:
The purpose of the margin of safety is to render the forecast unnecessary.
(3) The final lesson from his talk:
Since most of what he says is simple, they will also be the hardest for us to do. That is one of the early lessons from his talk itself – from the discussion of the episode on cancer treatment vs. cancer prevention.