Stop Reading Mindless Investing Quotes

Stop Reading Mindless Investing Quotes

Everywhere I turn it feels like I’m inundated with thousands upon thousands of mindless investing quotes that seem profound but don’t actually tell us anything.

Warren Buffett quotes are by far the worst. I love Buffett. I’ve read his biography many times and I follow him on Twitter despite him tweeting about as often as I visit LinkedIn. No, I don’t care that my friend from high school has endorsed me for underage drinking.

Buffett is the master of saying quotable things that don’t actually say anything. Don’t believe me? These are considered to be some of his top investing quotes:

“I don’t look to jump over seven-foot bars: I look around for one-foot bars that I can step over.”

“Diversification is a protection against ignorance.”

“Only when the tide goes out do you discover who’s been swimming naked.”

“Never invest in a business you cannot understand.”

And so on.

It’s not that these are that bad, it’s that they really don’t go beyond anything the average investor doesn’t already know. Diversification protects against risk. Great opportunities are better than mediocre ones. And bull markets make everyone look good.

Well, duh. This is all pretty basic stuff.

Let’s face it. If somebody worth $10 million was sitting in an office somewhere and saying this stuff nobody would care. A few people would enjoy it, but there sure wouldn’t be thousands of people slobbering all over themselves in a race to talk about how smart the guy is.

Besides, Buffett breaks his own rules all the time.

Buffett’s favorite holding period is forever, yet he’s bought and sold big positions in stocks like Exxon Mobil, Suncor, and Tesco.

He’s a famous advocate for concentrated portfolios, yet Berkshire Hathaway has 62 operating divisions and owns 48 stocks. In what world is a portfolio with 110 different businesses considered concentrated?

And he’s staunchly anti-leverage despite using insurance float as a form of free leverage for decades.

There are a million other examples of this, but you get the point. Why should we take these quotes overly seriously when the guy who utters them changes his mind when it’s convenient to him?

They’re not going to make you rich

Investing quotes are like Doritos. They’re light, tasty, and hugely addictive. But if you’re not careful you’ll eat the whole bag and just feel bad about yourself after.

Let’s go back to the Buffett example. Warren Buffett did not get rich because he understands the difference between a concentrated and diverse portfolio. Warren Buffett got rich because he put his nose inside of annual reports for 40 years. Kids? Screw my kids. I gots reading to do.

This comes down to the real problem I have with investing quotes. They’re no substitute to actually doing the work. Yet we believe they are.

It’s much easier to go on Twitter and see what a certain superinvestor thinks about value than it is to crack open an annual report and make it through all of the accounting footnotes. And then read the previous annual report. And the one before that.

No, we’d much rather argue about the state of value investing today or creating mental models or the importance of inverting our thinking. Don’t get me wrong; those are all important things to understand. But then you’ve got to do the work, and that’s where most people drop the ball. It isn’t just about getting the concepts right. It’s figuring out the fine print, too.

Some of that stuff can come from a pithy investing quote. But a lot of people won’t actually learn the lesson without experiencing it themselves.

They don’t work for everyone

The basic rules of getting rich are simple. Save money. Then take risks. Do it right and that capital eventually grows into something much larger.

The details also matter, however. Investors like Walter Schloss and Benj Gallander have done well investing in the trashiest stocks. Buffett, Munger, and John Templeton have done well buying great businesses. Thousands more have gotten rich buying real estate, or starting their own business, or investing in private mortgages.

The point is there are plenty of people who forge their own path and still end up doing very well for themselves. They regularly ignore advice from the greatest investors in history because it doesn’t apply to them.

That’s the lesson here. There’s no reason to copy Buffett 100% of the time. Besides, that route is already pretty crowded. At the end of the day, reading investing quotes will only get you so far. To really understand more than the next guy, you’ve got to do the work. Which is far harder than scrolling through a bunch of one liners.

Why Rich Dad Poor Dad Haters Have it All Wrong

Why Rich Dad Poor Dad Haters Have it All Wrong

Before we really get going with this blogening, allow me to admit I have a bit of a soft spot for Rich Dad Poor Dad, the controversial book by noted shill Robert T. Kiyosaki. The T stands for Takin’ Your Money, probably.

The first personal finance book I ever read was The Wealthy Barber. The second was Rich Dad Poor Dad, and it was all the motivation I needed. I was going to open my own business and make something of myself, dammit.

Kiyosaki lays it all out there in black and white. The book is filled with invaluable lessons about the basics of ownership, the benefits of working for yourself versus slaving away for (dun dun dun) THE MAN, how the rich buy assets while the poor just waste their money on crap, and so on.

This is pretty basic stuff for me in 2017, but in 1999 I drank all this stuff up. I didn’t really understand it, but I LURVED it.

The problem with Rich Dad Poor Dad

The plot of the book is simple. Kiyosaki has two dads. One is his actual dad while the other is his friend’s dad. The friend’s dad is super successful even though he dropped out of high school, while his real dad struggles despite going to a good university and having a prestigious government job. Rich dad ends up teaching Robert how to become rich. Robert retires young and then writes this book to help out the kids.

There’s just one problem. We’re pretty sure large parts of that story were made up.

Kiyosaki describes his rich dad having a large array of assets in his native Hawaii, owning everything from fancy Waikiki Beach real estate to a fleet of convenience stores. People actually researched it and couldn’t find anyone who fit the description. Kiyosaki has also strongly hinted Rich Dad was a composite character based on a few different people.

Kiyosaki also advocates some unethical stuff in the book, including weaseling out of contracts by putting in clauses that say “subject to partner approval” and to trade stocks on non-public information. He also recommends deducting vacations from your taxes because you were there to look at real estate.

I know somebody in real life who actually does the last thing, btw. It scares the bejesus out of me and I don’t even do it. Don’t do tax fraud, kids.

My favorite part is when Kiyosaki claims his net worth is between $50 and $100 million, “depending on the day.” Because hey, doesn’t everyone’s net worth fluctuate 50% a day?

And then there’s the Rich Dad Academy, where a high-pressure salesperson will teach you everything there is to know about real estate for the low, low price of a couple thousand bucks. The internet is filled with horror stories about Rich Dad education ripping off unsuspecting suckers faster than Scientologists.

OH GOD I’M SORRY PLEASE DON’T SEND LEAH REMINI AFTER ME.

Why it’s still a good book

Back in 2005, Yahoo asked Kiyosaki and a bunch of other experts to pen personal finance articles. I remember reading some of his and they were terrible. They advocated buying gold and avoiding stocks and other questionable things. I’ve also heard his additional books are hot garbage.

But if I was recommending a book for somebody who wants to start their own business or who wanted to get started buying rental property, I’d recommend Rich Dad Poor Dad in a heartbeat.

The average personal finance book teaches somebody how to save and to pick ETFs over mutual funds. It’s the safe way to get rich.

Rich Dad Poor Dad is different. First of all, it’s inspirational as all hell. The story might be made up, but it’s still good. And the lessons presented within are timeless.

I’ve talked to dozens of people over the years who told me how it was Rich Dad Poor Dad that started them on the path of thinking like an investor and not like a consumer. Successful people, too. It’s amazing how many real estate investors love the guy.

The bottom line

Yeah, there are parts of the book that suck, and you can certainly call Kiyosaki’s morals into question once you know about Rich Dad Academy. But there’s a reason why it’s the number one selling personal finance book of all freakin’ time. There’s some good stuff in it.

It’s silly to read something like Rich Dad Poor Dad and proclaim yourself an expert. But something has to get that journey started, and this book has been the kick in the ass millions needed to get started. Maybe we should remember it that way, rather than focusing on the stuff that’s wrong with it.

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The Difference Between Frugal and Cheap is The Dumbest Argument in Personal Finance

The Difference Between Frugal and Cheap is The Dumbest Argument in Personal Finance

The world of personal finance is a relatively simple place.

At the root of it, getting ahead financially is a simple math problem even a fourth grader can solve. All one needs to do is spend less than what they make. You’re really just adding and subtracting numbers to create a comfortable savings rate.

After that, it’s all semantics. There are a number of ways to create yourself a comfortable savings rate. You can spend less or make more or a combination of the two.

This is the main reason why I don’t write much about personal finance anymore. The world of investing is infinitely challenging. The world of saving is not. I’ve been saving so long it’s automatic. Growing my pile is much more complex.

But every now and again I get pulled back into the fray, mostly to make fun of something that’s pretty stupid. Today is such a day. The topic? The difference between frugal and cheap. God, what a useless “debate.”

The only difference

That I seeeeeeee

Is you are exactly the same

As you used to be!

Really, Nelson? The Wallflowers?

That song was good! Did you know the lead singer’s dad is Bob Dylan?

Anyhoo, let me run down the difference between frugal and cheap for those of you who luckily have no idea about this debate. Frugal people are smart with the way they save money, while cheap people will save cash in any way possible, including outright theft from their friends!

You know I’m alarmed when I put an exclamation mark at the end of a sentence!

(That exclamation point was a typo)

Some examples? Don’t mind if I do. A frugal person might spend time finding the right pair of shoes on sale, while a cheap person would go and buy the cheapest pair that fit. A frugal person would shop around for airfare, while a cheap person would take the bus. Or (and this one is my favorite), a frugal person orders water in a restaurant, while a cheapskate gets a soda and makes sure to take advantage of free refills.

Yes, that was actually presented at least once, presumably with a straight face.

There are a million other examples, but basically, it boils down to this. A frugal person saves money in socially acceptable ways, while a cheap person is willing to go the extra mile. That’s the only difference between frugal and cheap people.

So if you intentionally only put in $20 for your part of the tab knowing your contribution was really $23, congratulations. You are officially a piece of trash. HANG YOUR HEAD IN SHAME, ASSHOLE.

The problem with this “debate”

There are a couple of problems with this debate.

First of all, the average person does. not. give. a. shit. It doesn’t matter if you’re doing whatever the personal finance circle-jerk-o-net has decided is acceptable. If all of your co-workers go out for lunch and you’re brown bagging leftovers every day, you better believe they’re mocking your ass at Subway. Even if they’re doing it lovingly.

Just because everyone in an obscure corner of the internet considers something acceptable doesn’t mean normal people will.

Because that’s what we are. Personal finance folks are freaks. We’re the money equivalent of that guy who’s up at 5am every damn morning jogging. We’re the financial version of 5th level vegans who don’t eat anything that casts a shadow. The average person looks at us with a mixture of admiration and contempt.

And we’re the group who decided the difference between frugal and cheap? We’re not normal. They’re normal. We’re weird.

Besides, the average consumer has no idea if one product is better than a competing one. Even the average personal finance nerd can’t do it. Have you ever noticed that the average person ALWAYS replaces a broken model of something they use a lot with something higher priced? They get pissed off that their precious whatever broke and want to avoid that feeling again. So they upgrade.

I’ve done it. I replaced a $400 laptop with a $1,200 MacBook when a $600 laptop would have been just as good. That $1,200 computer was just a $600 one dressed up in a nicer package. I fell for the marketing hook, line, and sinker.

That was the opposite of being smart. At least I can admit it. The number of “I’m smart by spending extra” blog posts outnumber “boy, that was a dumb buy” 87 million to one.

Remember this

This whole difference between frugal and cheap argument would be nothing but an amusing sideshow if it wasn’t for one scary thing. Many cheapskates have been shamed into abandoning perfectly fine habits because of pressure from other cheapskates who think such a thing is unacceptable.

I knew a guy whose mom would wash plastic forks after they were used. Oh lordy, did we make fun of him. It got to the point where he’d make sure to throw out his plastic fork after using it to eat his lunch.

I happen to think washing plastic forks is a poor use of someone’s time. But his mom didn’t.

The person who doesn’t wash plastic forks has no moral superiority over the person who does. That’s what all of this comes down to. This whole debate is nothing more than people who save money in acceptable ways trying to shame others into having the same outlook on life.

So if you’re a dumpster diver, or someone who uses the generosity of groups to save a few bucks, or even someone who will take advantage of 19 different free meal offers on your birthday, knock yourself out. You be you, no matter what guys like me think about it. Just don’t be a dick about it and we’re cool. And in exchange I promise not to laugh at you for making your own laundry detergent.

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Why Are We So Obsessed With Productivity?

Why Are We So Obsessed With Productivity?

There’s a certain list that’s been making its way around the interwebz, passed around like a herpes outbreak at a communal farm. You’ve probably seen it, and hopefully hated it just like I did. Aww, you guys really are just like me. We finish each other’s… dinners?

Anyhoo, here’s the list, and it is delightful.

14 things before breakfast

Of course it’s from the World Economic Forum. What, having a meeting in Davos each year isn’t douchey enough for you people?

This list is so dumb, starting with the first thing. EVERYBODY WAKES UP BEFORE BREAKFAST YOU BLUNDERHEADS. You’re already 1/14th of the way there just by being a person who doesn’t jam Eggo Waffles into their mouth while sleeping.

And then they drink water. Or is it coffee? What about milk? Or juice? Or some mystery liquid in a mug with the slogan Men’s Tears printed on it? I have that mug. It’s ironic.

Numbers 3, 4, and 5 are the best though. Apparently you’re supposed to wake up, then exercise, then work on a top-priority business project, and then work on a personal-passion project. Really? How much work are we talking about here? Five minutes? Cause I’d argue you might as well do nothing if you’re only going to dedicate five minutes to something.

And then, after working on two important projects and getting a workout in, it’s not even close to breakfast time. You’ve still got to make the bed, meditate, and spend quality time with both the wife and kids. Obviously as the same time because, y’know, multitasking.

We’re not done yet. You’ve still got to write down things you’re grateful for (productivity lists, obvs), plan and strategist, and then check their email and read the news. Only then, at 4:46pm, can you finally have breakfast. Oh, you fainted from hunger hours ago? Slacker.

These dumb productivity lists

I absolutely hate productivity lists.

I get it. We all want to get more done in a day. If I can up my output from 3,000 words a day to 4,000 words without having the quality all go to hell, I would do it. And I do try stuff to try and make that happen. Some of it even works.

But there’s one thing I’ve realized in life. There’s no set way to doing the things you want to do.

I remember being 18 years old stocking shelves in a grocery store, a job I took because there was no way in hell I was going to go to university. I was making $10 per hour, which was a decent wage for kid fresh out of high school without any experience.

The rest of my graduating class took the more traditional route and went to college. Many of them live in nicer houses than I do. They drive better cars and stay in five-star hotels when they go on vacation, not in the three-star joints my ass usually ends up.

But they don’t have as much money in the bank. Not even close.

Alright, alright. You can stop humblebragging now.

That’s not even a humblebrag, Italics Man. That’s a 100% brag.

What’s the point of my story? For years I did everything wrong. I didn’t have to-do lists and I barely even thought about my productivity. I didn’t set goals or meditate or wake up at 4:30 am. And I sure as hell didn’t network over coffee before breakfast.

All I did was make smart decisions, over and over and over again. And then I worked harder than my peers. The rest all fell into place.

The problem with productivity 

I usually fall asleep within 15 minutes of my head hitting the pillow. Sometimes even within five minutes.

But other times I’ll toss and turn as my brain goes a million miles a minute. There’s no turning it off when that happens. The best I can do is distract myself temporarily.

I used to hate it, but t I’ve changed my tune completely. I need uninterrupted time to work out my problems. I’ll think about buying some particular stock or some sort of blog project or whatever. After thinking about it for an hour or two a solution will become obvious and I’ll implement it the next day.

There’s nothing in a productivity log about setting aside time to think. Yet those hours I spend wrestling with my problems can end up being incredibly profitable. If I think about something for two hours and it makes me $5,000, that thinking time is incredibly profitable.

But is it productive? Damned if I know. All I do know is I guarantee your productivity log or whatever it’s called doesn’t have much time for self-reflection or thinking about things. And no, you can’t just schedule that stuff in. It’s not like a meeting with Bob in accounting.

Stop with the obsession

Smart, ambitious people will naturally gravitate to these kinds of things. It’s a byproduct of having those attributes.

But I think the average person needs to channel their inner Warren Buffett. No, I’m not talking about having two wives, although you could do that if it floats your boat. I’d suggest moving to Utah.

Buffett is the master of saying no to things. He doesn’t jam his schedule full of useless meetings and strategy sessions. He understands the power of making a few important decisions that really matter. Much of his time is dedicated to working up to those large decisions.

Compare that to your normal day. How much time is spent on important shit? And how much time is spent answering dumb emails?

The ultimate lesson here is simple. Don’t let productivity consume your entire life. It’s okay to take a little time to sit back, relax, and smell the roses. In fact, you might end up richer doing just that.

My Troubled Obsession With Investing in Retail

My Troubled Obsession With Investing in Retail

I have a problem you guys. I’m way too interested in investing in retail.

I’ve spent much of my adult life in the retail business. My first real job was working in a grocery store, where I quickly rose up from annoying 18 year-old night crew stock boy to slightly more mature 21 year-old evening manager who was left in charge of people twice my age. I did that for a couple of years before being passed over for a promotion a couple of times. Probably because I was only 23. So I left and burned the place down on my way out the door.

No, I didn’t. In fact, some of the guys who work at that chain are still my friends. I still find myself talking to long-term staffers each time I go into the store. It’s a family owned company that manages to still feel small while growing to $100 million or so in sales. All-in-all it was a great experience and I have only good things to say about the people I worked with.

At least most of them. You still suck, Malcolm.

After a disastrous few years as the most mediocre real estate agent slash mortgage broker you’ll ever find, I went back into the retail business. This time I sold potato chips to a wide variety of retailers, ranging from Wal-Mart to convenience stores to crummy little hotels and bars.

It was then I really started to form opinions about the retail business. And they weren’t very positive.

The realities of retail

I won’t mince words. Retail is a shitty business that’s being crushed by the interwebz. And a number of other things.

There are inherent weaknesses in the sector. First, let’s talk about staffing. This post about retail employees picked up some traction this week after being featured in some obscure message board.

That’s what I call every message board that isn’t Reddit.

The post said most retail employees are terrible and don’t deserve to be promoted. Current retail employees disagreed with the usual objections. “I work hard!” “You can’t expect me to be on time EVERY day!” “I only missed three days this month!”

I used to think teaching was the profession that overrated themselves the most. It’s not. It’s your local grocery store cashier.

The situation isn’t going to get any better, either. Retail needs people with brains, and will even pay them accordingly. These folks rise up through the ranks quickly. But most people with a brain will avoid the sector. For obvious reasons.

It’s also a hella-competitive industry. All it takes to open up your own store is a little bit of capital and the ability to order stuff off the internet. I know someone who opened up her own clothing store with less than $2,000 in out of pocket costs after picking up all the hardware from another retail store that failed.

Grocery is a little better. You don’t get many ma and pa operators because it costs a few million to get a decent store up and running. But then you run into a different problem. How are you supposed to charge more for cereal when the store down the road is selling the exact same damn box for $2 cheaper?

And I haven’t even touched on people selling stuff on the internet, who can happily accept lower margins because they don’t have the expense of a physical store.

How to invest in retail in such a world

It’s easy. Don’t.

Oh, come on. That’s a cop-out answer.

Every retailer eventually goes to zero. It’s only a matter of time.

A&P dominated selling food in the first half of the 20th century. The chain practically invented the supermarket.

It’s currently in bankruptcy protection.

F.W. Woolworth founded his namesake stores starting in Utica in 1878. The company got so big that it ended up using the largest skyscraper in the world at the time — the Woolworth Building in NYC — as its headquarters.

The only part of Woolworth’s that’s still around today is Foot Locker.

Sears went from being a retail behemoth into a laughing stock. It merged with KMart a dozen years ago, because hey, why not try mixing turds with other turds?

And so on. There are a million of these. Hell, even YOUR BOY Warren Buffett was in the retail business for a few years before getting out.

Yeah, there are exceptions. Wal-Mart and Target were incredibly successful investments. So has Amazon and a bunch of other e-retailers. It’s a winner takes all world and certain companies have won. But that doesn’t mean you should be investing in retail.

My struggle

Most serious investors know enough not to touch retail. I just can’t help myself.

Value investors talk a lot about circles of competence. An investor should only put money to work in a sector he knows well. It’s why Warren Buffett doesn’t invest in tech. He doesn’t get it.

My problem? I know retail. I know it inside and out. Hell, I’ve been known to go into grocery stores for fun just to check out the merchandising standards. I can tell you who’s a good operator and who isn’t after going into a few stores.

But that stuff doesn’t matter. Safeway stores are consistently nice with great fresh departments. Yet Empire, its parent company, is down 50% in the last few years.

Reitmans, a stock I still hold, has consistently nice stores filled with good stuff. It’s ran by smart guys with a lot of experience and they’ve done a nice job closing down non-performing stores.

And yet in the three (plus) years I’ve owned shares, I’m up about 3% a year. Big whoop.

I need to realize something. Any edge I think I might have when it comes to investing in retail? I never had it. It’s time for me to get out of this god-forsaken sector, and I think y’all should too. Don’t be swayed by the hopes of a turnaround. Just leave and never come back. Trust me. It’ll be better that way.

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