Pioneer Woman & The Magic of Untreated Boredom

Posted on September 2, 2019 // 4 Comments

I hope that everyone had a boring Labor Day weekend! I say that because boredom is a magical thing, especially when left untreated with a computer/TV/smartphone screen. I had a lovely quiet afternoon where I sorted out a big box of old electronics, and my mental wanderings inspired me to make some important changes in my daily schedule.

It turns out that Ree Drummond understands. Now, I’m more of a Barefoot Contessa fan myself, but the Pioneer Woman brand has grown into an empire. TV show, magazine, cookbooks, and I’m sure some sort of branded kitchenware. You’re not a real food celebrity until you have kitchen towels and cutlery with your name on it. Let’s see… Check and check!

I just stumbled upon this older New Yorker magazine profile, which revealed the origin story. Before that, she was a stay-at-home-mom that got pregnant on her honeymoon and continued to have four children. Then one day…

One morning in May, 2006, eleven years after Drummond arrived in the country, Ladd announced that he was taking all four kids, including one-year-old Todd, who would sit in the saddle with him, to work cattle. “He said, ‘You stay home and take time for yourself,’ ” Drummond recalls. “It was literally the first time I had been alone in the house for a several-hour period.” Usually, when she had a free moment, Drummond hopped on a homeschooling message board, which she frequented for adult interaction. But that day she decided “to start one of those blog things.” She had read only one blog, Doc’s Sunrise Rants, written by a homeschooling single lesbian mother of triplets in Oregon. But she thought it seemed like a fun, efficient method of keeping in touch with her mother, who had divorced her father and moved to Tennessee.

This struck a chord with me because it was similar to how this blog got started. My wife and I had just gotten married and moved to Portland, Oregon for her new job. I managed to get a remote working position, but that meant that there was no longer a nearby office for me to visit each day. I no longer had a desk. There I was, in a brand new city with no friends, no co-workers, and a wife that worked 60-80 hours a week. I became bored out of my mind! I also decided to start “one of those blog things”, which led to other related businesses, and so on.

Now, I don’t have a global media/cutlery empire, but I still think that boredom can be a powerful thing. According to this Wired article, academic research agrees. When you are in a constant state of stress, when you are constantly putting out fires (or changing diapers), all you are doing is reacting. Occasional, extended boredom gives space for your creativity to grow. When was the last time you really let yourself get bored?

Comic source: XKCD

Filed Under: Entrepreneurial, Funny, Inspirational //

Berkshire Hathaway Post-Shareholder Meeting CNBC Interview 2019 Full Video, Full Transcript (Buffett, Munger, and Gates)

Posted on May 14, 2019 // Leave a Comment

On the Monday after the recent Berkshire Hathaway shareholder meeting, Becky Quick of CNBC did another 2-hour interview with Warren Buffett, Charlie Munger, and Bill Gates. CNBC has thankfully posted the entire interview online along with a full transcript.

As usual, I like things directly from the source, so I watched the entire thing. Here are my notes that deal with investing:

Warren Buffet-style value investing distilled. You start out by picking a good business first. Then, you pay attention to the price. If the price is good, you buy. If the price is not attractive, you don’t. You can’t predict the mood of Mr. Market, he may be depressed or manic. (If it’s not a good business, then skip it no matter the price.)

But we watch the prices of things we do more than current events. Because in the end– we aren’t buyin’ ‘em because what’s gonna happen next month or next quarter. You know,we’re really buying ’em because we think they’ll be good businesses ten years from now. If somebody came to us with a good business today, we’d buy it. And we’d buy it regardless of what’s going on in the tariff situation. We might this wouldn’t be the case. But you might– we’re more likely perhaps to get something when other people are– fearful. You see that in a big way instantly in the market, you know, in the market for businesses. It’s– but it’s–still there in people’s minds.

On share buybacks and Apple. Share repurchases, or buybacks, are when a company buys its own shares outstanding. People argue about how this is “good” or “bad”, when really it’s all just rather pointless.

Repurchases can be the dumbest thing in the world or the smartest thing in the world. and I’ve seen both but they’re just — repurchases by the company are just like purchases to us, they’re dumb a one price and smart at another price. And I like it when companies — I like it when we’re invested in companies where they understand that. Many companies just repurchase and repurchase, you know, it’s the thing to do, and they’re encouraged to by some shareholders and by their brokers. Repurchases can be dumb. They can be smart. At Apple, they’ve been smart.

Berkshire has never bought at stock at IPO. Here’s a simple thought model that shows why buying a new-issue stock on IPO is nothing to get excited about.

WARREN BUFFETT: Well, because I looked at it, I really don’t want to discuss Uber. And I don’t have any special feelings about it than any other coming to market. But I would say that in 54 years — well, I don’t think Berkshire’s ever going to – I mean, the idea of saying the best place in the world I can put my money is something where all of the selling incentives are there, commissions are higher, you know, the animal spirits are rising. I mean, that’s going to be better than 1,000 other things I can buy where there is no similar selling enthusiasm and the desire to get the deal done on extra commissions. That’s the single best thing to buy on a given day. I mean, it’s –

CHARLIE MUNGER: And I can’t think of a time we’ve ever done it.

WARREN BUFFETT: Yeah.

BECKY QUICK: Ever bought an IPO.

CHARLIE MUNGER: Yeah. Never will.

When asked about a book recommendation, Buffett said The Moment of Lift: How Empowering Women Changes the World by Melinda Gates. There are some other practical observations about topics like politics and healthcare, if that floats your boat.

Filed Under: Inspirational, Investing //

Charlie Munger: Financially Independent at Age 38 in 1962

Posted on May 12, 2019 // 4 Comments

Despite the fresh packaging, we should remember that the “FIRE” concept (Financially Independent, Retire Early) is anything but a new concept. Even I can’t help being a little intrigued by the clickbait title “This Secret Trick Let This Couple Retire at 38”. Such an article could have been written about the 95-year-old Charlie Munger before he started investing alongside Warren Buffett:

The first 13 years I practiced law, my income [from practicing law] was $300,000 total. At the end of that 13 years, what did I have? A house. Two cars. And $300,000 of liquid assets. Everyone else’d have spent that slender income, not invested it shrewdly, and so forth.

I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait. And when I quit law practice it was because I wanted to work for myself instead of my clients, because I knew I could do better than they did.

Net worth analysis. According to his Wikipedia bio, the 95-year-old Munger graduated from law school in 1948. Let’s say he practiced law from 1949 to 1962. At the end of those 13 years, he states that he had $300,000 in liquid assets, a house, and two cars. The median value for a Los Angeles area house in 1962 was about $15,000. The median cost of a new car in 1962 was about $3,000. Adding this all up means his net worth in 1962 was about $321,000.

That was a significant amount of money in 1962. According this CPI inflation calculator, that is the equivalent of $2.7 million in 2019 dollars. In other words, the Munger household was financially independent when he was 38 years old.

Income analysis. He also states that in those 13 years as a lawyer, he made $300,000 total. For the sake of simplicity, let’s just say he earned the same income every year. That works out to $23,000 per year. This was a relatively high income – $193,000 per year in 2019 dollars. According to this source, the median family income in 1962 was $6,000 per year. That means he was earning about four times the median average household income.

Super-saver, super-investor, or a little of both? Maybe he shared this somewhere else, but I don’t know his saving rate or his investment return. He does boast of both not spending all that “slender” income and also about investing it “shrewdly”. We have his annual income and his final ending net worth, so you can set one and figure out the other using a compound return formula. I’m assuming everything is after-tax for simplicity again.

  • Let’s say he was a super-saver with a 50% saving rate. That means he saved $11,500 every year and invested it for 13 years. That would work out to an 10.5% annual compounded rate of return.
  • Let’s say he was a super-investor with a 20% annual compounded rate of return. That would work out to an annual savings of $5,500 per year, or a 24% savings rate.

I found that the annualized return of the S&P 500 index from January 1949 to January 1962 was about 18% when you include dividends (source). Thus, my guess is that he was somewhere between these two markers: 50% savings rate/10.5% annual investment return and 24% savings rate/20% annual investment return. These stats are definitely admirable and impressive, but also show that he didn’t hit the lottery or anything crazy.

Munger’s example reaffirms that if you have a relatively high income, save a high percentage of that income, AND invest that money into productive assets, your net worth will grow quite quickly.

A criticism of financial independence seekers is that it is pitched to “everyone” but only works for the rich. It is absolutely true that it is the easiest for high-income earners. How could it be any other way? At the same time, there are many households that earn high incomes that spend 95%+ of it every year. If these folks realize they have financial independence within their grasp, and then change their behavior to achieve it, I still view that as a positive thing. It’s always hard to spend less than the people you hang around with.

In our case, we both eventually earned six-figures, but not the entire time. When we earned a combined $60,000 a year, we lived on $30,000. When we earned a combined $100,000, we lived on $50,000 per year. When we earned $200,000, we lived on under $100,000. Would we have been able to maintain the 50% savings rate on a $60,000 income for 15 years? I’ll never know. I know it would have been much more difficult, and I’m glad we didn’t have to try. I’m also glad we started when we were young and without kids.

Managing expenses (frugality) alone will not get you there, but I still believe it is an important factor once you get your income to a certain level. I would argue that a household earning $100,000 and spending $50,000 per year is much better off in the long run than a household earning $150,000 and spending $125,000 or even $100,000 per year. Now, if someone is making minimum wage, it will be hard to have a lot left over to invest. Your efforts would be best focused on the income side of the equation.

Bottom line. Charlie Munger was born in 1924 and reached financial independence at age 38 from his earnings as a lawyer (before he became partners with Warren Buffet). While he is now best known as a billionaire investor, he took a familiar path to financial independence: solid 9-5 income, consistently high saving rate, and prudent investment of the difference. The same formula he started using in 1949 remains available 70 years later to someone starting in 2019.

Filed Under: Frugal Living, Inspirational, Investing, Retirement //

Charlie Munger 2019 Wall Street Journal Interview Transcript

Posted on May 7, 2019 // 1 Comment

The best thing I read today was definitely Charlie Munger, Unplugged, the full transcript of a 6-hour interview with Charlie Munger about his philosophies on business, investing and life, as conducted by Jason Zweig and Nicole Friedman of the Wall Street Journal. (I’ve tried to share a link via my paid WSJ subscription, but there may still be a paywall. Articles like this definitely help make me feel that my subscription is worth the money.)

I enjoy Munger’s direct and open take on many things. Honestly, I think reading his advice helps make me a better person, not investor. Also, he’s a 95-year-old billionaire – can you imagine anyone more incentivized to do exactly what they want with their remaining time? The article is rather long, so while I recommend reading the entire thing for yourself, here are some selected highlights.

How do you spend your day?

Well, I have always sought, since I quit law practice [in 1965], to have a lot of time in every day to read and think. And talk to a few friends about this or that. And I don’t do that because it will make me more money, I do it because it’s my nature. And I had to use that nature because I needed a living for a big family. But it’s just my nature.

Warren’s the same way. We both hate too many appointments in one day. We both have long segments [of free time]. The lives we live would look to anybody else like academics.

Will Berkshire Hathaway beat the S&P 500 in the future?

I think it we’ll beat it a little. But that’s not bad with a market cap of over $600 billion. That’s difficult! Most people won’t do as well as we will. I talked to Warren today. We’re buying one little company…as we sit here. And we haven’t bought anything big for a long, long time. It’s really getting hard for us. These other people will pay a lot more.

Q: If there were one company other than Berkshire you would recommend for the next decade or two, what would it be?

In America it would be Costco. Other than in America, buy the strongest companies in China.

Q: A lot of young Americans seem to be turning against capitalism, on the grounds that income inequality is out of control. What can be done about that?

The world as I know it, from personal experience and from reading, has always concentrated power.

Without the inequality, you don’t get modern private-ownership capitalism, which is what produces the plenty. And so even your kids, if they tried to make an equal civilization, and farm the land that way, would end up with not enough to eat. You’ve got to have individual ownership of a lot of things, with somebody getting and gaining for himself, because otherwise you don’t get the plenty. And the only option you have is to make the social safety net big or small, and you can make it stupid or [you can make it] wise[r], the richer you are.

In other words, the better your inequality-producing civilization that produces the plenty is, the more you’ve got to put into the social safety net. Now if you get a place like Denmark or Sweden or something, a lot of these modern students would like it better, free education, free medical care and so forth. And if you have to bet, the United States will be way more like Canada pretty soon, in terms of more free education at the university level and more Medicare and some kind of medicine for all. And that we can afford without ruining the productivity of the civilization.

…. We can afford [a higher minimum wage]. If you make it too high it will be counterproductive but yes, a prosperous civilization can have a higher minimum wage the way it can have a social safety net. Don’t make it too great and you can afford it.

I have more Democratic children than I have Republican children. I’ve got both.

On Jack Bogle.

You’ve got to remember, Bogle happened to be right about something important. But that [was] his only advantage. He was a monomaniac. And so that’s an odd characteristic. I would not pick Bogle to have the run of the place. He just was very right on one very important subject [the importance of minimizing investment costs], and therefore he’s been very useful.

On payday lenders, the lottery, and legalized gambling.

These goddamn payday lenders, they’re the scum of the earth. Everybody’s working on it but not hard enough. That’s a group that ought to be forced out of existence.

And the way we abuse the poor with the lottery! Think of how contrary it is to the interests of the poor to play the lottery. It’s like a tax on ignorance. They’re vulnerable. I don’t think we should be doing that, but of course everything like it I’m voting against. I always vote against legalized gambling. I just lose all the time. I feel like I’m pushing on a straw and somebody is just pushing back harder every time.

On selfishness and the value of a good reputation.

Another thing that really helps is people, a lot of people think that real selfishness, very extreme, is what works. But it doesn’t.

If you have a reputation for being decent to work with and unselfish, you make more money, not less. And at Berkshire, I can’t tell you the things that we have bought where the people wanted a good home for something that they love and they trusted us to take care of their loved one. That sounds ridiculous to talk about, in that language about businesses. But why wouldn’t you love something you spent your life building up? It’s very natural to love it – it’s your own creation. Of course you want it in good hands.

On his ability to delay gratification (aka “frugal cred”).

The first 13 years I practiced law, my income [from practicing law] was $300,000 total. At the end of that 13 years, what did I have? A house. Two cars. And $300,000 of liquid assets. Everyone else’d have spent that slender income, not invested it shrewdly, and so forth.

I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait. And when I quit law practice it was because I wanted to work for myself instead of my clients, because I knew I could do better than they did.

On opportunities.

You only get a few opportunities, and you have to grab them aggressively when they come because even in the most favored life, they’re really rare. My mother listened to all this stuff, and it meant nothing to her. She was never interested in money or worldly success, but she just appropriated the stories to me because they’d amused her.

I always feel that the opportunities are rare. I only get a few and then I have to seize them aggressively.

This last quote is definitely something that I strongly associate with Munger. Even in this interview, you notice he says it twice. It’s something to keep in the back of your mind, whether is applies to an investing opportunity, a career opportunity, or even finding a life partner. Work hard, do your analysis, but in the end you’ll have to take action to get the big results.

Filed Under: Behavioral Economics, Inspirational, Investing //

Richard Feynman and Fighting Burnout With Curiosity

Posted on April 29, 2019 // 2 Comments

While going back through my Kindle highlights, I came across the autobiography of Richard P. Feynman, “Surely You’re Joking, Mr. Feynman!”: Adventures of a Curious Character. Feynman won the Nobel Prize in Physics in 1965 but was also something of a celebrity in his time due to his varied contributions and many eccentric adventures.

To me, the most inspiring thing about him was his almost child-like endless curiosity. He didn’t mind getting into the dirty details of something he found interesting. It could be a radio or a bank safe. In addition to his physics research, he started making art (under a pseudonym) and sold enough pieces that he scored a gallery showing. He played samba in a Carnaval band in Brazil. Feynman liked “authentic knowledge”, meaning learning by tinkering and doing, not by memorizing something in a book.

However, even Feynman felt pressure at times as a professor of physics at a prestigious research university. He was getting burned out:

Then I had another thought: Physics disgusts me a little bit now, but I used to enjoy doing physics. Why did I enjoy it? I used to play with it. I used to do whatever I felt like doing—it didn’t have to do with whether it was important for the development of nuclear physics, but whether it was interesting and amusing for me to play with. When I was in high school, I’d see water running out of a faucet growing narrower, and wonder if I could figure out what determines that curve. I found it was rather easy to do. I didn’t have to do it; it wasn’t important for the future of science; somebody else had already done it. That didn’t make any difference: I’d invent things and play with things for my own entertainment.

[…] So I got this new attitude. Now that I am burned out and I’ll never accomplish anything, I’ve got this nice position at the university teaching classes which I rather enjoy, and just like I read the Arabian Nights for pleasure, I’m going to play with physics, whenever I want to, without worrying about any importance whatsoever.

Eventually, his scientific wanderings led him to his shared Nobel Prize.

My takeaway: We all get burned out sometimes. Try to keep it fun. Look for something that sparks your natural curiosity. Make it a game.

The NY Times has an article right now about Why ‘Find Your Passion’ Is Such Terrible Advice. It’s really just an argument about terminology. We don’t “find” our passions like a lost sock. We develop them over time. It’s hard to get good at anything if you’re not enjoying yourself when early on the learning curve. Your inner curiosity (“passion”?) still matters.

I’m pretty sure I enjoy personal finance more than 99% of the population, but even I get burnt out occasionally. This is often when I take my “fun money” account and look for new investments that might be a learning opportunity. I haven’t written about it yet, but one of my experiments is buying a small multi-year guaranteed fixed annuity (MYGA). (Don’t take this as a recommendation.) I also challenged myself to put together two family vacations for 5 people over 15 nights funded entirely with a hodgepodge of airline miles and hotel points. I combined American miles, Hawaiian miles (also an American Express transfer partner), Hyatt hotel points (also a Chase Ultimate Rewards transfer partner), and Marriott points.

Filed Under: Inspirational //

The Lifestyle Secrets of Okinawan Centenarians

Posted on April 9, 2019 // 3 Comments

CNN has a new series called “Chasing Life with Dr. Sanjay Gupta”, and its first episode examines the lifestyles of the impressive centenarians of Okinawa, Japan.

Nearly two-thirds of the residents of Okinawa are still functioning independently at age 97. That meant they were in their own homes, cooking their own meals and living their lives fully — at nearly 100 years old!

Here are three factors noted in the show:

Ikigai. This means having a sense of purpose in life. Gupta says that one way to figure this out is to first imagine that you no longer needed to do anything for money. In that case, what would you regret not doing with your life? What do you love, and what does the world need?

ikigai

Here is a previous post on Ikigai – Finding Your “Reason For Being”. I have noticed that many people who seek out financial independence feel something “wrong” about their current trade-your-life-for-money environment. They are not living a life aligned with their “ikigai”.

Moai. This means having a social group within the community that has common interests and can provide both financial and emotional support. Family is important, but this appears to be an additional support system. This social component of longevity is critical and should not be overlooked.

Hara hachi bu. This means that you should stop eating when you are 80% full (and thus still a little bit hungry). People in Okinawa eat fewer calories in general, and the calories that they do eat tend to come from sweet potatoes, soybeans (legumes), a variety of vegetables, and only a little meat.

Okinawans centarians have also been examined in the book Blue Zones: 9 Lessons for Living Longer From the People Who’ve Lived the Longest (which I have not yet read). Here is another Venn diagram from the Wikipedia entry that shows the common characteristics between Okinawa and two other Blue Zones (Loma Linda, USA and Sardinia, Italy).

Bottom line. It’s not just living for a long time, but it’s living an active, engaged, happy life for a long time. You won’t get this by taking the right pills from orange bottles. You need to spend your time doing something that you feel matters to the world. You need love and support from other humans. You need to eat natural foods, but not too much.

Filed Under: Family, Inspirational, Retirement //

Charlie Munger CNBC Interview 2019 Full Video, Full Transcript, and Notes

Posted on March 12, 2019 // Leave a Comment

Here’s another Charles T. Munger interview (last one for a while, I promise!) for those of you that share a peculiar fondness for hearing someone encourage rationality, patience, and self-discipline. After the Daily Journal 2019 annual meeting, Munger did a 30-minute interview with Becky Quick of CNBC. (See similar Buffett CNBC interview.) I guess they forgave Munger’s jabs at Jim Cramer, as they posted the entire interview online along with a full transcript.

I’m going to be honest, I didn’t get as many gems out of this interview as some of his other stuff. Here was my favorite part.

The secrets to life can also fit on an index card? As Munger noted earlier, “If it’s trite, it’s right”. We’ve seen personal finance advice fit on an index card, so why not life advice as well?

BECKY QUICK: Charlie, so many of the people who come here come because they’re looking for advice not on business or investments as much as they’re looking for just advice on life. There were a lot of questions today, people trying to figure out what the secret to life is, to a long and happy life. And– and I just wonder, if you were–

CHARLIE MUNGER: Now that is easy, because it’s so simple.

BECKY QUICK: What is it?

CHARLIE MUNGER: You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you’re supposed to do. And all these simple rules work so well to make your life better. And they’re so trite.

BECKY QUICK: How old were you when you figured this out?

CHARLIE MUNGER: About seven. I could tell that some of my older people were a little bonkers. I’ve always been able to recognize that other people were a little bonkers. And it helped me because there’s so much irrationality in the world. And I’ve been thinking about it for a long time, its causes and its preventions, and so forth, that I– sure it’s helped me.

Filed Under: Inspirational, Investing //

Charlie Munger Daily Journal Annual Meeting 2019 Full Video, Full Transcript, and Notes

Posted on March 11, 2019 // 1 Comment

If you like hearing Warren Buffett and Charlie Munger talk at the Berkshire Hathaway (BRK) annual meeting, you should also watch or listen to Charlie Munger at the Daily Journal (DJCO) annual meeting. DJCO is his personal pet project, and I feel like he lets loose more at this meeting than at BRK. For 2019, CNBC broadcast the entire 2-hour Q&A session online. Latticework Investing generously shares a full transcript as well. I choose to listen to this over any finance-related podcast.

Here are my personal notes and highlights:

Think for yourself.

[…] my definition of being properly educated is being right when the professor is wrong. Anybody can spit back what the professor tells you. The trick is to know when he’s right and when he’s wrong. That’s the properly educated person.

Index funds have become more and more successful for a simple reason. The evidence is getting stronger over time that they provide better long-term performance due to lower costs and better tax-effeciency.

Another issue of course that’s happened in the world of stock picking, where all this money and effort goes into trying to be rational, is that we’ve had a really horrible thing happen to the investment counseling class. And that is these index funds have come along and they basically beat everybody. And not only that, the amount by which they beat everybody is roughly the amount of cost of running the operation and making the changes in investments. So you have a whole profession that is basically being paid for accomplishing practically nothing. This is very peculiar. This is not the case with bowel surgery or even the criminal defense bar in the law or something. They have a whole profession where the chosen activity they’ve selected they can’t do anything.

[…] I don’t have any solution for this problem. I do think that index investing, if everybody did it won’t work. But for another considerable period, index investing is going to work better than active stock picking where you try and know a lot.

If you are trying to beat the indexes, you need LESS diversification, not more. Wait for a few fat pitches and don’t hesitate to swing. This isn’t as widely known, but Munger’s personal portfolio is roughly 1/3rd Berkshire Hathaway stock, 1/3rd Costco stock, and 1/3rd invested in Li Lu, an investment manager based in China.

But the whole trick of the game is to have a few times when you know that something is better than average and to invest only where you have that extra knowledge. And then if you get just a few opportunities that’s enough. What the hell do you care if you own three securities and J.P. Morgan Chase owns a hundred? What’s wrong with owning a few securities?

[…] So the whole idea of diversification when you’re looking for excellence, is totally ridiculous. It doesn’t work. It gives you an impossible task.

Now at a place like Berkshire Hathaway or even the Daily Journal, we’ve done better than average. And now there’s a question, why has that happened? Why has that happened? And the answer is pretty simple. We tried to do less. We never had the illusion we could just hire a bunch of bright young people and they would know more than anybody about canned soup and aerospace and utilities and so on and so on and so on. We never had that dream. We never thought we could get really useful information on all subjects like Jim Cramer pretends to have. (laughter) We always realized that if we worked very hard we can find a few things where we were right. And that a few things were enough. And that that was a reasonable expectation.

Avoid any pitches that promise easy money from stock-picking. Penny stocks, day-trading, trends, charts. All of them.

Then if you take the modern world where people are trying to teach you how to come in and trade actively in stocks. Well I regard that as roughly equivalent to trying to induce a bunch of young people to start off on heroin. It is really stupid. And when you’re already rich to make your money by encouraging people to get rich by trading? And then there are people on the TV, another wonderful place, and they say, “I have this book that will teach you how to make 300 percent a year. All you have to do is pay for shipping and I will mail it to you!” (laughter) How likely is it that a person who suddenly found a way to make 300 percent a year would be trying to sell books on the internet to you! (laughter) It’s ridiculous.

Have modest expectations in stock market returns.

Well, my advice for a seeker of compound interest that works ideally is to reduce your expectations. Because I think it’s going to be tougher for a while. And it helps to have realistic expectations. Makes you less crazy. I think that…you know they say that common stocks from the aftermath of the Great Depression, which was the worst in the English speaking world in hundreds of years, to the present time may be an index that’s produced 10 percent. Well that’s pre-inflation. After inflation it may be 7 percent or something. And the difference between 7 and 10 in terms of its consequences are just hugely dramatic over that long period of time. And if that’s 7 in real terms, but achieved starting at a perfect period and through the greatest boom in history, starting now it could well be 3 percent or 2 percent in real terms. It’s not unthinkable you’d have 5 percent returns and 3 percent inflation or some ghastly consequences like that. The ideal way to cope with that is to say, “If that happens, I can have a happy life.”

Be very careful about who you chose to partner up with in your life.

We all know people that are out married, I mean their spouses are so much better. Think of what a good decision that was for them. And what a lucky decision. Way more important than money. A lot of them did it when they were young, they just stumbled into it. Now you don’t have to stumble into it, you can be very careful. A lot of people are wearing signs, “Danger. Danger. Do not touch.” And people just charged right ahead. (laughter) That’s a mistake. Well you can laugh but it’s still a horrible mistake.

On becoming rich.

This business of controlling the costs and living simply, that was the secret. Warren and I had tiny little bits of money. We always underspent our incomes and invested. And if you live long enough you end up rich. It’s not very complicated.

“If it’s trite it’s right.”

I think personal discipline, personal morality, good colleagues, good ideas, all the simple stuff. I’d say, if you want to carry one message from Charlie Munger it’s this, “If it’s trite it’s right.” All those old virtues, they all work.

My general idea is there’s no point in fretting too much about what you can’t fix. It’s a big mistake to fill yourself with resentments and hatreds and so on. It’s such a simple idea but so many people ruin their lives unnecessarily. Envy is such a stupid thing to have because you can’t possibly have any fun with that particular sin. Who in the hell ever had any fun in envy? What good could envy possibly do for you? And somebody is always going to be doing better than you are. It’s really stupid. So my system at life is to figure out what’s really stupid and avoid it. It doesn’t make me popular, but it prevents a lot of trouble.

Filed Under: Inspirational, Investing //

Thank You, John C. Bogle

Posted on January 16, 2019 // 6 Comments

Vanguard announced on January 16, 2019 that its founder, John C. Bogle, passed away on at his home in Bryn Mawr, Pennsylvania at 89 years old. There will no doubt be many tributes; here are a few same-day articles from WSJ, Bloomberg, Reuters, and great tweet from Morgan Housel.

Jack Bogle was a champion of thrift, simplicity, and keeping investing costs low. While he reached the popularity level where people would write entire columns about “Why Bogle is Wrong about This or That”, I was always annoyed when people would pick at one little thing he said. I felt that his strongest message was that of common sense. Sometimes it took multiple readings and time, but he really offered a lot of valuable, reasoned knowledge in his books. Almost exactly a year ago, I wrote about my Jack Bogle Appreciation curve:

boglecurve

My first mutual fund investment was in the Janus Mercury fund in the very early 2000s. I was chasing performance and Morningstar ratings, and the fund was actively managed with high turnover and high expenses. Thanks to reading his books, my subsequent investments were in low-cost Vanguard funds that were available to a DIY investor. You can now buy ultra-cheap commission-free ETFs from nearly every brokerage account. New investors may take this for granted, but I’m old enough to remember that this was not always the case! This was solely due to Vanguard’s success:

vanguardbarr

He created a unique structure where the unnecessary “Helper” fees stayed in the pockets of the people who invested with Vanguard (and indirectly anyone who invests in a low-cost index fund today). This has resulted in an estimated $1 trillion saved by average everyday investors.

Today, my family is financially secure and we have a pretty clear plan for the future as well. The majority of my net worth is held at Vanguard. My life was materially improved by a man that I never got the honor to meet. The best I could do was to win a personally-signed book from a charity auction for his foundation.

Thank you, Mr. Bogle. I will try my best to heed your advice.

p.s. If you do not know that I am talking about, please do yourself a favor and read The Little Book of Common Sense Investing from the library or buy a copy. It is very short and a good place to start.

Filed Under: Inspirational //

Wild Book: What Do You Plan To Do With Your One Wild and Precious Life?

Posted on December 27, 2018 // 6 Comments

I’ve been catching up on some memoirs and recently finished Wild by Cheryl Strayed. (I haven’t seen the movie.) I mention it here because the author did a “Big Awesome Thing” in hiking the Pacific Crest Trail and I think achieving financial freedom is also a “Big Awesome Thing”. I thought – What makes a person able to accomplish a “Big Awesome Thing”?

First, instead of rehashing another plot summary for the book, I’ll steal the blurb from Amazon:

At twenty-two, Cheryl Strayed thought she had lost everything. In the wake of her mother’s death, her family scattered and her own marriage was soon destroyed. Four years later, with nothing more to lose, she made the most impulsive decision of her life. With no experience or training, driven only by blind will, she would hike more than a thousand miles of the Pacific Crest Trail from the Mojave Desert through California and Oregon to Washington State—and she would do it alone. Told with suspense and style, sparkling with warmth and humor, Wild powerfully captures the terrors and pleasures of one young woman forging ahead against all odds on a journey that maddened, strengthened, and ultimately healed her.

Cheryl Strayed father also left her when she was young. An excerpt from the book:

The father’s job is to teach his children how to be warriors, to give them the confidence to get on the horse and ride into battle when it’s necessary to do so. If you don’t get that from your father, you have to teach yourself.

In my opinion, the lack of a strong father figure and the early death of her mother left her without the support or belief that she had power over her own life. But by pushing herself to do this seemingly random but difficult task and overcoming many obstacles along the way, she discovered that she did have that power inside. Perhaps each person is drawn to a different “Big Awesome Thing” that can be the first stepping stone to a life lived consciously. Hers was being free in the wild:

It had only to do with how it felt to be in the wild. With what it was like to walk for miles for no reason other than to witness the accumulation of trees and meadows, mountains and deserts, streams and rocks, rivers and grasses, sunrises and sunsets. The experience was powerful and fundamental. It seemed to me that it had always felt like this to be a human in the wild, and as long as the wild existed it would always feel this way.

After that, Strayed could attain happiness and fulfillment because she had the belief that she could change her own circumstances. Her actions mattered. It was worth trying, taking that risk to make your life better. I fear that many others have lost that self-belief and thus don’t even try.

I enjoyed the following excerpt from a poem that was included in the book – “The Summer Day” by Mary Oliver.

Tell me, what is it you plan to do
with your one wild and precious life?

Filed Under: Book Reviews, Inspirational //

Shel Silverstein “The Voice” and Financial Freedom

Posted on December 2, 2018 // Leave a Comment

I remember being both amused and confused by Shel Silverstein’s poems as a kid. When I read them again today to my own kids, my reaction is mostly the same, except some of them are even darker than I remember!

I ran across a Fatherly roundup of inspirational quotes from Silverstein and really enjoyed this one called “The Voice” from his newer book Falling Up:

There is a voice inside of you
That whispers all day long,
“I feel this is right for me,
I know that this is wrong.”
No teacher, preacher, parent, friend
Or wise man can decide
What’s right for you–just listen to
The voice that speaks inside.

For me, after shock-proofing, the path to financial freedom was all about finding alignment with this voice. I’m still working on it, but there is less of an inner struggle when you’re not also stressed about how to fix the heater and also cover the rent due next week.

Filed Under: Inspirational //

Good Luck or Bad Luck? Maybe, It’s Hard To Tell

Posted on August 16, 2018 // 3 Comments

Reading children’s books to my kids has become a regular source of new wisdom. I guess that’s not surprising, if the goal is to teach kids about life. Here’s one that came across recently and keeps popping back in my head.

I first read it in the children’s book Zen Shorts by Jon J. Muth (Caldecott Honor book). There are many variations of it online, and it may be credited as a Chinese, Buddhist, Taoist, or Zen parable. Here’s a brief version from Daily Zen:

There is a Taoist story of an old farmer who had worked his crops for many years. One day his horse ran away. Upon hearing the news, his neighbors came to visit. “Such bad luck,” they said sympathetically. “Maybe,” the farmer replied.

The next morning the horse returned, bringing with it three other wild horses. “How wonderful,” the neighbors exclaimed. “Maybe,” replied the old man.

The following day, his son tried to ride one of the untamed horses, was thrown, and broke his leg. The neighbors again came to offer their sympathy on his misfortune. “Maybe,” answered the farmer.

The day after, military officials came to the village to draft young men into the army. Seeing that the son’s leg was broken, they passed him by. The neighbors congratulated the farmer on how well things had turned out. “Maybe,” said the farmer.

I enjoy the sound of Alan Watts’ voice, so I am also embedding this YouTube version:

I still have a hard time applying this parable in real-time, but it does help me after some time passes. This parable is also tricky because you have to remember both when life puts up a roadblock and when you receive an unexpected windfall.

Filed Under: Career, Inspirational //
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