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Lessons from the Wealthy
Money solves a lot of problems. What remains is the essence of life.
EJ
April 19, 2024
Happy Friday!
Thank you to everyone who replied to last week’s email. Open rates / engagement rates have ticked up a bit more! When I swapped domains earlier this year, there was a bit of a downtick in email delivery success rates.
Similar to last week, if you would like to help me a bit more, quickly hit reply to this email. You can simply say “Hi”!
By replying, you tell all the email clients out there that these emails are legitimate — which in turn helps ensure these emails get to your (and others’) inboxes.
Thank you!
On My Mind
In my day job, I invest in early stage software companies. In general, I try to partner with companies where a combination of factors might, over time, result in exponential revenue growth and eventual profitability. I do have a good deal of flexibility when it comes to the situations I evaluate, however.
This flexibility means that I’m currently working on something different. One of these quickly growing, currently unprofitable companies is acquiring a much larger, profitable company where revenues are actually declining. These falling revenues are expected to continue as customers choose to move to next-gen tools, such as those of the acquirer.
A key part of the investment thesis is that the combined entity can reverse these declines. In short, if we could offer customers a next-gen product before they leave, shouldn’t they prefer to avoid the hassle of changing vendors?
That thesis is a hypothesis on how people act. The customers are looking for a next-gen product. If you can reduce the friction of getting a next-gen product, they might choose less friction and stay with you instead of evaluating the rest of the possible vendors.
It doesn’t matter if this specific next-gen product is the absolute best alternative for their use cases — all the next-gen products are somewhat different with nuanced use cases where each shines. What might matter most is that one alternative is easier to choose.
That is important to keep in mind for ourselves. How can you make it easy to work with you? How can you reduce the friction preventing others from moving forward with your ideas?
It isn’t necessarily the most capable or smartest person that wins. Often times, it is the one that is easier to work with.
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Quote of the Week
Diligently seek facts. Advice, never.
— Philip Carret
Philip Carret started one of the United States’ first mutual funds — all the way back in 1928. Warren Buffett is quoted as having said that Carret had “the best long-term investment record of anyone I know.”
If you had invested $10,000 with Carret and stuck with him for the 55 years he ran his fund, you would have $8mm when you finally pulled the investment out.
John Galbraith said something similar when it comes to writing: stick to the facts — and I think it is a great reminder.
I think often people are looking for answers. Answers are dangerous because someone else can make it for you. If you look for facts instead, you get to make your own answer — and you know why you landed where you did.
Poll of the Week
What is the net worth of the richest person you know personally? |
Last Week
Question: Did you personally watch the eclipse on April 8th?
Results: 54% did watch it! I, however, did not as I was traveling.
Earlier This Week
Question: Before today, did you know what Delta Force was?
Results: 63% knew what Delta Force was! I read the book… so I think I would have to vote alongside the majority here.
Things to Read
Preparation | From Don’t Forget to Prepare by History Investor, 2024
I had almost no idea of what to expect on the morning of 13 September 1978, when I loaded my pickup, kissed my family goodbye, and set out on the five-hour drive up I-95 from Hunter Army Airfield in Savannah, Georgia, for Fort Bragg, North Carolina— and points unknown.
I merely reminded myself that the future is always perfect. And wished it to be so.
This week, I refreshed a story from when I had ~15% of today’s subscriber count. It is one of my favorites — and I have changed my emails to be more targeted with key takeaways. The story is inspired by the book Inside Delta Force.
I have a number of older articles that could be refreshed with (hopefully) better writing and new perspectives, so I will try to work those in every so often.
Takeaways:
For Investors:
1. Most of your time should be spent preparing for action, not actually acting.
For Builders:
1. Don’t overly define your endstate. Build what is valuable, take feedback, and be flexible.
2. You will hit snags and take undesired detours along the way. Expect them.
3. Not everyone who starts the journey with you is meant to make it to the end.
For Us:
1. Compete with yourself yesterday, not those around you today.
2. Ignore unwarranted negativity from others.
3. Build skills that add flexibility to your future.
4. Seize great opportunities. There will always be uncertainty.
What Money Buys | From Lessons from the Ultra-Wealthy by Frederik Gieschen, 2024
That was lesson number two: money solves a lot of problems. What remains — like how to live a meaningful life, the conundrums of family and relationships, suffering, death — is the essence of life…
The rich are indeed different: they are exposed to a lot more of its energy. They live a more extreme version of the relationship we are all exposed to. Some master their relationship to money and live the life they want; others serve their money’s demands, unconsciously, and have their lives shaped for them.
Frederik Gieschen started his career as an investment banking analyst before working for a few different ultra-wealthy family offices. Today, he writes online about finance, literature, and history.
His career working with family offices gave him a glimpse into what made some of the richest so very different than the average American family — and also how they were not truly that different, at the end of the day, when it comes to what really matters.
History Rhymes | From Most Financial Phenomena are Older Than They Look by Byrne Hobart, 2024
Clews' book is not for everyone: it's repetitive, it's gossipy, and there are apparently many stories that he got wrong. Regardless, the constant flow of “unprecedented” events isn’t the only constant Clews illustrates; he also notes that people who succeed in finance sometimes have a tendency to spend a lot of time on their political opinions, often self-serving ones.
Clews does this to an egregious degree, pointing out that the unsung heroes of the Civil War were—yes!—the patriotic bankers who underwrote treasury auctions. So Clews' is a book for late 19th century financial history completists.
Byrne Hobart draws from Henry Clews' book Fifty Years in Wall Street, published in 1900, to illustrate that financial markets have always been subject to speculation, political influence, and unexpected crises — regardless of what we might say today of “unprecedented situations.”
In short, while the financial world has changed significantly in terms of regulations and technology, the underlying behaviors and patterns of market participants remain consistent over time. For example, Hobart compares the recent popularity of SPACs to the speculative financing of railroad companies in the 19th century and the use of over-the-counter equity derivatives to the risky financial maneuvers of an Erie Railroad director in 1868.
Visuals
ChatGPT nearing all-time high usage…
The US is now South Korea’s largest export partner…
… As is the case, now, in Taiwan
If you found today’s issue interesting, more than anything, I would appreciate it if you forwarded this email to someone that might find it meaningful. It is a big deal to me whenever someone reads my work, and I appreciate your support.
Have a great weekend,
EJ
Twitter / X: @HistoryEJ
Disclosure: Nothing in this article constitutes investment advice. More detailed disclosure here.
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