Articles
The Three Forgotten Powers: It’s Never Too Late to Start
Did you know that Warren Buffett made over 99% of his fortune after he turned 50? And over 96% after he qualified for Social Security, in his mid-60s. As much as I have read almost everything about this legendary investor over the years, I never looked at his admirable record this way. Morgan Housel shared this observation in his new book: “The Psychology of Money.” It got me thinking about the forgotten powers of compounding, persistence, and longevity.
Albert Einstein called compound interest the most powerful force in the world. Woody Allen said that 80% of success is showing up. Both Warren Buffett and Charlie Munger are living proof of how longevity can help in life and investing. However, Charlie Munger humbly remarked recently: “I don’t think I deserve any credit for longevity.”
Two years ago, I gave a talk about investing to a curious audience of remote workers and digital nomads in Gran Canaria, Spain. Their lifestyle choices were as interesting to me as what I had to share about building wealth was to them. Work from home or work from anywhere were still foreign concepts to most people at the time. I shared with them a Chinese proverb that I often like to mention. It says that “The best time to plant a tree was 20 years ago. The second-best time is now.” One of the most frequently asked question after my talks is whether it’s too late to start. The most surprising is the broad age range of those asking. If you have compounding, persistence, and longevity working in your favor, it’s never too late to start! Warren Buffett was not a poor man at 50, but he still didn’t have even 1% of what he was to accumulate over the rest of his life. You could say that he was just getting started.
It’s not just money that enjoys compounding, persistence, and longevity. There are so many other aspects of life that benefit from all three of those forgotten powers. Whether it’s relationships, friendships, new experiences, knowledge, skills, they all build on each other and grow if we only let them. I remember introducing myself to at least one new friendly person every week in my early college days, turning strangers into familiar faces. I remember that I had a book in my hand as far back as I remember, turning unknown ideas into familiar concepts. I also remember looking at so many pursuits as yet to be discovered, turning them into hobbies and passions: from flying planes to sailing, scuba diving, to surfing. All in the name of learning something new! Very few know, but I even piloted helicopters at some point. I still remember what precise fine eye-hand-foot coordination it takes to hover over the ground without moving or spinning around.
I never stopped my college ritual of turning strangers into familiar faces. I even met Morgan Housel, whose book inspired this article. A few years ago, one morning, we had a friendly conversation over coffee in downtown Manhattan. I’ve always appreciated his writing. I was looking forward to reading his book when it came out, and it doesn’t disappoint.
Over the years, I grew a circle of fellow passionate readers, and we keep trading book titles whenever we can. My partner and mentor, François Sicart, and I have exchanged so many investment books over the years. There are many history books that my mentor Jay (James) Hughes, has shared with me. My reading universe kept expanding with recommendations from my dear friends Jake Taylor, Rishi Gosalia, Yedu Jathavedan, and many others. I’m grateful to all of you. Thanks to them, I learned more about artificial intelligence, the art of making bets, and so much more. Our knowledge keeps compounding. You’d know well how I often like to ask friends, clients, our interns – what are you reading lately? I’m always looking for a new book that will surprise me, offer a new perspective, point me in a new direction.
I remember my dad looking at me with real concern mixed with awe when I geared up for my first open water scuba dive on the Red Sea coast in Egypt almost 20 years ago. Growing up in a household with two doctors, I heard countless stories of what can go wrong the minute you leave the house. My dad even had a stint as an ER doctor when he was young and had no shortage of stories to share. That day as I marched into the sea, he held off his usual words of caution and said: “You’ll have an interesting life because you keep trying new things.” He wasn’t wrong. I have kept trying things, and I let compounding, persistence, and longevity take care of the rest.
In my early days as an investment analyst, like many other aspiring investors, I made my own value investor pilgrimage to Omaha, Nebraska. I convinced my good friend Michael Butts to join me. We shared a cubicle for a while earlier in our careers (I know that soon for younger readers growing up in work from anywhere world, I’ll have to explain what a cubicle was!). We attended Berkshire Hathaway’s Annual Shareholder Meeting together. We had a real Omaha steak in downtown Nebraska with an oversized potato next to it. That trip was a major highlight in my lifelong journey of getting to know Warren Buffett. This big event for value investors has a virtual edition these days. This year it was 100% virtual due to COVID as it is expected to be next year.
It might be twenty years now since I read my first book about Warren Buffett. I might not remember all the details anymore, but there was a time when I knew inside out every investment case for all the major holdings of Berkshire Hathaway. Despite my seemingly extensive knowledge of Buffett and his business partner Charlie Munger, I never looked at his record and fortune the way Morgan Housel’s book helped me see it. A new perspective can make all the difference. Over 99% of his wealth was accumulated past his 50th birthday.
There are three powers at our disposal: compounding, persistence, and longevity. Compounding happens if we are doing the right thing over and over again, and it’s more about not doing something unnecessary like losing it all or hurting yourself in the process. Persistence is something we have control over, and it’s more about never giving up and always showing up. Longevity is a blessing, but there is a lot we can still do to improve our odds to some extent. I never want to forget the importance of luck, and I prefer to call it being fortunate. The more time we have, the more we stick to it, and the more we let compounding play its role, the more fortunate we’ll be no matter what pursuit we choose. I like to close with Charlie Munger’s quote that I shared in my first book: “Outsmarting the Crowd.” He once said: “After all, how much good would we do in the world if all we did were buy some securities, kept them in a safe deposit, and they went up in value? It wouldn’t be enough a life.”
The more I learn about investing, the more I understand everything else in life, and the more I learn about everything else, the more I understand investing. There are three powers at our disposal. Monetary successes may be important, but there is a lot more to life than that. Most of all, whatever it is you choose to pursue, it’s never too late to start!
Happy Investing!
Bogumil Baranowski
Published: 12/10/2020
Disclosure:
The information provided in this article represents the opinions of Sicart Associates, LLC (“Sicart”) and is expressed as of the date hereof and is subject to change. Sicart assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by Sicart at any time without notice.
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