The challenges of thinking in decades—not years

This week, The Wall Street Journal published a delightful profile of Wilmot Kidd, an 80-year-old fund manager who has outperformed the S&P 500 since 1974. Kidd has only been interviewed a handful of times, so it was a treat to get an inside look into his investment philosophy. Not too surprisingly, Kidd’s style could be aptly described as both concentrated and long-term oriented. What was surprising, however, was just how long-term his approach really is—in one example provided, Kidd owned a security for 34 years—simply letting it compound out over time. The phrase “long-term investing” is highly subjective and admittedly a platitude. (What does it mean, anyway? Is it one year? Five years? 50 years?) The reality is, it takes real guts to actually think in terms of decades as an investment manager—and make decisions solely for the benefit of current partners. “We’re in business to make money for the stockholders,” Kidd says. “Not off the stockholders.”

“Over the past 15 years, Central’s annualized portfolio turnover rate has averaged 11%. That means it holds its typical stock for nearly a decade—roughly six times longer than the average active mutual or closed-end fund, according to Morningstar. Owning stocks for years, rather than months, minimizes the costs of trading, reduces the burden of researching new holdings and enables Central to burrow deeply into understanding a business. ‘We want to own growing companies during as much of their period of growth as we can,’ says Mr. Kidd. That enables compounding to work its magic. ‘It takes time to learn to live with an idea,’ he says. ‘All these portfolio managers [who sell stocks within a year], I don’t believe they even know what they own.'”


From Zen Buddhism to John Milton to Warren Buffett—a conversation with William Green

“You can see within investing this exquisite complexity of life, all of the ways in which we’re living in this murky place, where we don’t know much, and we can’t tell what the future holds… And yet we somehow have to try to make decisions.” I loved this whole conversation between Frederik Gieschen and William Green, the author of RICHER, WISER, HAPPIER: How the World’s Greatest Investors Win in Markets and Life. Throughout this podcast, I found myself nodding along with Green’s perspective on everything from meditation to gambling to the personal character traits (err, flaws?) required to become a world-class investor. Green’s range of knowledge and his ability to connect disparate areas of study—and relate it back to investing theory—is truly impressive. “When I study things like Tibetan Buddhism, which I also find exquisitely beautiful or stoicism, which I found very helpful, I see this tremendous overlap,” he says. “It’s really all about consciousness. It’s about how do you gain control of your inner landscape? How do you gain control of your mind?”

“Investing is just a subset of worldly wisdom. We’re trying to figure out how to live, how to think better, what money actually means, what makes a rich and abundant life… And so I’m not super impressed just with the ability to make money and not live a more thoughtful life. I think I was more impressed with that when I was younger. I liked that aspect of the game of just being able to outwit the crowd. There’s something about that, that I found very, very appealing.”


“Three steps to the future…”

I have long been a fan of Mary Meeker’s yearly Internet Trends reports, which offer a sort of visual look-back and prophecy into the future of technology. Benedict Evans, a former partner at Andreessen Horowitz, has been publishing his own big-picture yearly trends since 2013. This year, his report, titled “Three steps to the future,” lays out some fundamental predictions around how the infrastructure of the internet is shifting, how the metaverse is growing, and how augmented reality could (and very well might) be a big part of our lives a decade from now. (Speaking of: Stay tuned for our “Re-imagination of Everything” report to be published in the new year.) 

“The most exciting themes in technology today are transformative visions for 2025 or 2030: crypto, web3, VR, metaverse… and then everything else. Meanwhile, hundreds of start-ups take ideas from the last decade and deploy them over and over in one industry after another. And trying to keep up, the old economy faces waves of disruption from ideas we first talked about in the 1990.”

A few more links I enjoyed: 

“We are woefully incapable of being satisfied with a prior desire, and many people argue that this is just a part of the human condition. That greed resets any goals you once had, and short of becoming a monk, you are destined to shift that goal by a few more commas. Of course, there is some truth to this, but I think this view only scratches the surface. Greed is the easy culprit to point to, but what really needs to be explored is something far more interesting: The way your progress toward a goal creates an entirely new identity.”
“Data science has helped general managers in baseball identify the range of skills, beyond great hitters and base runners, needed to win a game. In investing, Reiner said data science has helped him think beyond security selection. ‘I thought my entire career that it’s about great stock pickers. You hear about stock pickers of the year, but you never hear about the portfolio construction [person] of the year,’ he said.”
“An American CEO saying that the customer is always right does not sound controversial, but this consumer focus is at the heart of what worries some actors, directors and agents in Hollywood. Consumers love streaming movies at home, and Chapek wants to double the number of Disney Plus subscribers in the next two years. But streaming is not good for the box office. And for decades, success at the box office has been a source of prestige in Hollywood and allowed top talent to make millions through the so-called backend, a bonus for hitting ticket-sales targets.”
“The challenge in trying to imagine something good that has not existed before is that in order to do so you have to go uphill against the downhill force of entropy. While entropy is a broad and certain path, everything about the good is narrow and unexpected. This makes it very very difficult to specify beforehand, almost like predicting the exact sequence of a million tosses of the dice. The weird thing about life and minds is that they are not random, but they are as unpredictable as random.”

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