Money (and life) should not be complicated
Warren Buffett thinks so too
$115,700,000,000
Quite a lot of money. Larger than the GDP of Ukraine, Luxembourg, Costa Rica, and Croatia, just to name a few. In terms of GDP, $115.7 Billion would make you the 60th largest country in the world.
To go further, here are a few things you can do with $115.7 Billion, outside of buying a country:
You could buy 24 of the 32 NFL teams and control 75% of the league
Pay for the in-state tuition for 1,111,345 students to go to college for free
Buy 276 Boeing 747 and start your own private airline
It really becomes a question of what you can't do, not what you can do.
The question might be best served for Warren Buffett as he may have spent time pondering that since $115.7 Billion is his rumored net worth. One of the many things we could learn from him.
The Many Lessons from Buffett
Warren Buffett is an established man. A man at the age of 92 who hasn’t slowed down and shows no sign of it. A man who is largely considered one of the best investors to walk this earth, if not the best.
The beauty of Buffett is he is a man who doesn’t seek to overcomplicate things. He is a vicious reader who loves McDonald’s in the morning, cans of Coke throughout the day, and prefers to top his meals off with cookies and chocolates. He started investing at 11 and still does to this day, 81 years later.
He is a man who doesn’t complicate his process and instead keeps it quite simple when it comes to investing. Much of his advice serves to simplify processes. He doesn’t have a complex, sophisticated financial model that spits out a buy, hold, or sell. Rather, he spends 80% of his day reading, something that would lie in the top .0001% of the population and that may be putting it lightly. Reading and consuming vast amounts of information daily.
When asked how to get smarter Buffett said,
“Read 500 pages like this every week. That’s how knowledge builds up, like compound interest.”
The best investor in the world keeps it rather simple. He doesn’t overcomplicate things. Often, we think life should be more complicated than it is. Investing is no different.
401ks, the simple road to success
For 401ks, the tried and true method for success is index investing, particularly the S&P 500. If you believe the United States economy will continue to advance and innovate, the S&P 500 is the way to go. I think it is fair to say most people believe this notion. It is the benchmark for all firms to evaluate their performance relative to the market after all, so some smart people at least believe in it.
It is a very simple process and is one that has withstood the test of time. $1,000 invested in the S&P 10 years ago, would be $2,800 today. Investing $1,000 20 years ago would be $4,537 today. It goes on.
It doesn’t have to be complicated. Things only start to become complicated when greed enters the picture. A need for a quick buck to satisfy a thirst.
Everyone wants to be a day trader, but no one wants to load shares of the S&P 500 every paycheck into their 401k. See Dave Portnoy. This is not to say you shouldn’t trade but realize it doesn’t have to be complicated. Have rules and mechanics set forth to not overcomplicate your process. Tastytrade is an example.
It is important to lay out a set of mechanics, or rules, for investing just like we would in life. Just like you would lay out a game plan for any workout at the gym, at a certain point, rules should be set forth to sell a stock at a certain profit percentage. It all should be calculated and outlined, you wouldn’t walk into a gym and just start benching 315 just like you wouldn’t throw all your money into a single stock with zero research. It’s reckless. You would attack with a calculated plan of allocating your hard-earned money. You would seek to make it simple, uncomplicated.
Investing, and life, don’t have to be hard but for some reason, we like to make it that way.
It Should Smack you in the Face
Jeremy Giffon, a private market investor, went on Invest Like the Best. He talked about investments.
“A great investment should just smack you in the face. Probably the best thing we ever took from Charlie was the too hard box. A good investment is just something that should be really easy to sell to the team, you should be able to pitch it in a few sentences. It just makes sense.
It's hard, it's really hard to do this. We'd catch ourselves all the time. We'd be on week three of debating this company, oh, should we buy this. The best thing we could do is go, "We've been debating this for three weeks, ergo, we should not buy it. It's not obvious. It doesn't smack in the face." And this comes back to incentives again, which is you have to have the ability, incentive-wise, to be able to say no. If you're being forced to deploy capital or whatever, you trick yourself into doing these deals. But the good ones, you're just like, yes, I get it. Let's do it. This makes a lot of sense.”
Jeremy is a very successful investor and the decision for him to invest in something is pretty simple.
The best investments should smack you in the face, why hasn’t someone else already taken advantage of it? Markets have some sort of efficiency anyway. It should be painfully obvious and something that requires little debate between your internal dialogue. It is avoiding getting too cute and complicated because when you get too cute, mistakes are bound to happen.
The Issue with the Bears
Don’t take it from me, take it from the Chicago Bears. In 2017, the Chicago Bears moved from the third pick in the draft to the second by swapping picks with the San Francisco 49ers as well as giving them the 67th, 111th, and a 2018 third-rounder. The Bears had their guy and did this despite the 49ers having zero interest in who they wanted. The definition of insanity. The Bears guy was Mitch Trubisky.
The Bears passed on both Deshaun Watson and Patrick Mahomes to draft Trubisky. Both objectively and subjectively it made zero sense.
Mitchell Trubisky in 2016: 3,748 Yds., 30 TDs, 6 INTs, Third-Team All-ACC, only year as a starter
Patrick Mahomes in 2016: 5,052 Yds., 41 TDs, 10 INTs, FBS passing yards leader, Top Collegiate Passer Award, Second-Team All-Big 12
Deshaun Watson in 2016: 4,593 Yds., 41 TDs, 17 INTs, CFP National Champion, Johnny Unitas Golden Arm Award, ACC Athlete of the Year, Davey O’Brien Award
To make matters even worse, some think Mahomes could end up being the best QB to ever play the game, although Tom Brady may want a word.
The Bears tried to overcomplicate the decision. They got greedy. They went for a guy whose best college accolade was third-team all-conference. Not to mention, they signed another QB to a three-year, $45 million contract earlier in the offseason. From both an objective and subjective standpoint, it should have smacked the bears in the face that Trubisky was not the top quarterback in the draft nor was it smart to trade up having just signed another QB to a $45 million contract. For three years.
Just learn from the Bears and don’t try to overcomplicate it. Reality is serving them a hard lesson. Since the 2017 draft, the Chiefs are 74-24 while the Bears are a horrid 42-56. Not great.
Parting Words
A lack of plan and making a process too complicated is a breeding ground for failure. Life is really a simple adventure and making healthy returns can be too. It’s when you begin to realize that these things aren’t that complicated after all, that you can finally go where you always wanted and achieve the things you have always desired.
Thanks for reading.
Scantron’s Selections - A few things I loved this week
Lucy Hale - The Diary of A CEO - A very real, honest conversation
Rick Rubin - Jay Shetty Podcast - Unconventional methods to success
Kyla Scanlon - Fast Company - Gen Z and job satisfaction