March 28, 2024

In Life As In Investing

Investing With Intention

In life as in investing, it's important to define a destination.

Without a destination in mind, invariably, we will find ourselves adrift, lost and at the mercy of others who have definitive destinations in mind.

In our daily lives, this idea is generally self-evident. When we get in a car, we do not do so without intentions as to our destination. When we get in a car, we deterministically set a destination to which we travel.

Very notably, the path to our destination will be non-linear: Obviously, we must navigate a series of turns, stops, and maneuvers to reach our destination, but we may also face significant obstacles, such as traffic accidents, inclement weather, detours due to road work, or vehicle malfunction.

That said, in the process of driving to our destination, we ultimately overcome these obstacles and reach our destination.

Of course, it is easy to see how this analogy manifests in our own lives. We all set goals and strive to achieve them; however, as we all know well, throughout the process of arriving at the achievement of those goals, there's an entire unfolding, and often surprising, journey we must experience.

Applying these ideas to our work together, I select the businesses I share with you very intentionally, as, over time, these businesses should collectively make up a "business of owning businesses," i.e., what I like to call a portfolio, for which I have definitive intentions as well, which I will discuss in just a moment.

In this vein, it's worth noting that, in investing in a constellation of businesses, or stocks, we're genuinely building a business of owning businesses. We're genuinely creating a startup of our own, and, through this lens, the idea that we must be intentional with our startup, i.e., portfolio, is amplified further.

I often share that businesses are like humans: some businesses take off right at the start, prodigies if you will. Some struggle early on but find immense success later in their lifecycles. Some are packed with potential but never quite figure it all out. Some die young. Some go on to be stars, and bear the affliction of their own great success (e.g., reproach cast at their "corporate greed," or endless antitrust lawsuits, or assassination of character by the media).

Notably, because businesses are like humans, the ideas with which I introduced this note are applicable: There must be intentionality in the development of a business. There must be defined goals to which the individuals, or perhaps neurons in the hive mind of the business, collectively work.

Without this intentionality, the business will invariably find itself in undesirable situations that lead to poor outcomes. The same could be said for our individual lives or our "business of owning businesses," i.e., portfolios.

To summarize these ideas, we all intuitively understand that we must live life intentionally, with definitive goals in mind. Businesses are akin to humans in that they are born, mature, and die, and throughout, definitive goals guide their development. So, because portfolios are "businesses of owning businesses," they too must be structured with definitive goals in mind.

Setting Goals: Our Destination

While I don't often discuss this with you, there is a definitive goal in mind that underlies each of the businesses I share with you.

This goal ultimately defines the direction of the "business of owning businesses" that you create with inspiration from the businesses I share with you, and it can be summarized in the following manner:

  • The end state of a portfolio populated with the businesses I share with you is a diversified, cash flow producing "conglomerate," i.e., business of owning businesses, i.e., portfolio.

Now, you may be thinking, "That's great, but none of these companies pays a dividend, i.e., produces cash flows."

And, prior to Q4 2023 earnings season, I would have said you have a point in some respect.

But, as of Q4 2023, the very gradual transition from "business of owning businesses" that only experiences equity appreciation to business of owning businesses that produces cash flows officially began.

In Meta's Q4 2023 earnings report, the company announced that it would begin paying a quarterly dividend, its first in its corporate history, and this marked the first trickle of cash flows that our business of owning businesses would begin dispensing.

Now, as of today, this dividend is like a tiny, tiny trickle of water through a tiny, tiny crack in a dam.

But, over time, as the businesses I share with you, i.e., the businesses that populate our business of owning businesses, mature, the trickle will become more robust, until it's a tiny stream; then, a larger stream pour through the dam; then, over decades, we could imagine it as a force that breaks the dam and creates a river of cash flows that irrigate the land downstream of the dam, creating a flourishing ecosystem in the process (a prosperous retirement, if you will).

Enjoy The Journey

To complete the analogy of living and investing with intention, a key component of the process of achieving any goal is the surprises that we experience along the way.

These are the delightful friendships we make, the hardships we must overcome, and the unforeseen circumstances in which we find ourselves that add the texture and depth to the journey that ultimately leads us to our set destination.

In the process of investing, the same concept applies, and what cannot be seen is precisely which of the companies we buy will blossom into the durable franchises that pay dividends in the future. What cannot be seen is which of our management teams will execute at 99th percentile levels year in and year out for decades to come. What cannot be seen is which companies will benefit from technological or industry evolution and which will suffer.

We can, of course, make informed decisions, projections, and estimations, with an eye towards the future, just as we can in achieving any goal in our lives, but the reality is that there will be unforeseen delights, surprises, setbacks, and everything in between along the journey.

But, so long as we have faith in the process and stay the course, I know that the goals we set, in life and in investing, will one day come to fruition.

Just a matter of enjoying the journey along the way.

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