What’s your relationship like with money?
Why elite students can't read books anymore. And my change in investment strategy.
How you see the world determines who you become - outlook shapes outcomes. I share business and life lessons that encourage a winner’s mindset.
Here are this weeks insights:
What’s your relationship like with money?
Elite College Students Can’t Read Books Anymore
I Made Changes To My Investment Strategy
You can access previous editions of my weekly emails here. Let’s begin!
(1) What’s your relationship like with money?
Rogan: What I like about money is to not think about it.
Brolin: Do you like spending it?
Rogan: I like buying stuff. I have a nice car. A 69 Camero. I like fun stuff. But for the most part I am not interested in it as a goal. Real freedom is when you go to a restaurant and not worry about what anything costs. Not have to think about the bill.
Brolin: Be grateful for it. God I am grateful that I can go anywhere in the world right now and get a meal and I don’t have to think how am I going to pay for this.
That’s Joe Rogan, one of the richest podcasters in the world, talking about his relationship with money. People confuse their relationship with money with how much money they have. It is two separate things. Your relationship with money has a lot to do with your upbringing. It starts developing based on how you see your family deal with money, how much access you had to it and how much you had to work for it.
You may have been born poor, got rich, but still spend like someone who has a scarcity mindset. On the other end of the spectrum you may have always had access to money and never had to work hard for it so you spend like there is no tomorrow.
Some people like cars. Others like travel. I like peace of mind. For me money equals optionality. It allows me to look after the needs and wants of the people I love. There is no bigger joy than being able to do things for others. It also allows me to do more of what I like and want and less of what I don’t. For example, I like to build businesses so I get to do more of it with people I like and admire.
Warren Buffett said that “Money just amplifies who you are. If you’re inclined to be generous, it makes you more generous. If you’re inclined to be selfish, it makes you more selfish.”
What is your relationship with money like? Once you are aware of it, you can change it for the better.
(2) Elite College Students Can’t Read Books Anymore
This story is quite scary but it highlights the problem that an entire generation is facing. And the problem is just getting worse. Can you imagine that students in colleges including elite ones like Columbia, Princeton and Stanford are struggling to read books because in their high schools “they had never been required to read an entire book.” They had just been assigned “excerpts, poetry, and news articles, but not a single book cover to cover.”
“Nicholas Dames has taught Literature Humanities, Columbia University’s required great-books course, since 1998. He said “It’s not that they don’t want to do the reading. It’s that they don’t know how. Middle and high schools have stopped asking them to.”
Ms Horowitch writes that the majority of the 33 professors she spoke to gave her a similar picture: “Anthony Grafton, a Princeton historian, said his students arrive on campus with a narrower vocabulary and less understanding of language than they used to have. There are always students who “read insightfully and easily and write beautifully,” he said, “but they are now more exceptions.” Jack Chen, a Chinese-literature professor at the University of Virginia, finds his students “shutting down” when confronted with ideas they don’t understand; they’re less able to persist through a challenging text than they used to be. Daniel Shore, the chair of Georgetown’s English department, told me that his students have trouble staying focused on even a sonnet.”
Why is reading such an important life skill? “According to the neuroscientist Maryanne Wolf, so-called deep reading—sustained immersion in a text—stimulates a number of valuable mental habits, including critical thinking and self-reflection, in ways that skimming or reading in short bursts does not.”
Bill Gate said that “Success comes from having the ability to focus on what truly matters and say no to distractions.” This generation and the upcoming generation is addicted to their smart phones. These devices are fracturing our ability to concentrate on anything for long periods of time. This means that the few children who have the assiduous ability to sit through books will be a cut above the rest.
When was the last time you read through an entire book? I am about to finish another book on the 80/20 Principle. I will share what I learnt from it.
Source: I found this story in Marcellus Sunday Emails
(3) I Made Changes To My Investment Strategy
I believe that wealth is created through investing. And the best way to compound your money over the long term is by investing in businesses.
In order to have the ability to invest, I needed to have savings. And in order to save, I needed to earn an income that was greater than what I spent every month. That’s what I did since I graduated from university. I spent less than I earned. I saved. And over time I accumulated enough savings to make investments. I first invested in myself and my business. I then invested in others businesses through equity in order to not have all my eggs in one basket. I kept learning. I kept performing. The more skills I developed, the more I earned, the more I saved, the more I invested. It is a virtuous cycle if done right.
If the businesses that I took a risk on, including mine, do well I can end up making a lot of money. And if they don’t do well I can end up wiping out two decades of savings. So needless to say, I calculate a lot.
My worst case scenario in terms of investing in others businesses (equity), is 12% CAGR over ten years. That is 3x my money in ten years. My best case scenario is 18%. That’s 5x my money in ten years. In the past three years, I have been below my worst case scenario. In order for me to make up to my best case, my portfolio would have to perform at 27% CAGR over the next 7 years. I took the decision to make a change.
My investments were all focused on small caps. I wanted to hit a home run by going for 10x in 10 years i.e. 26% CAGR. That has not happened in the past three years. What if it doesn’t happen at all? What if I don’t even make my worst case of 12% CAGR in ten years? I remembered Howard Marks stating that “if you are willing to be the top performing fund then you should also be open to be at the bottom. We don’t want to be the top. We just want to be above average for a very long period of time.”
I realized that the sunk opportunity cost was holding me back. I bit the bullet and decided to move out of my Little Champs all-in strategy. I left with my capital intact, and have decided to go into the complementary strategies of MeritorQ and Global Compounders Portfolio (GCP), two uncorrelated investments.
MeritorQ is Rules-Based investing for different seasons. It invests in 30-45 stocks carefully chosen based on value and profitability. This rebalances every quarter based on market fundamentals and share price movements to ensure that the portfolio stays on track. Since inception two years ago it has given an annual return of 25.04%.
Global Compounders Portfolio (GCP) on the other hand strategically targets 25-30 deeply moated global companies (70-75% allocation towards US Stocks) aligned with megatrends to foster sustainable growth. The portfolio aims for mid to high teens compounding of free cash flow and earnings, focusing on defensive stocks that deliver higher than GDP growth with low earnings volatility. Since inception two years ago it has given an annual return of 28.72%.
I was trying to be the hare who wants to get rich quick. But I need to be the tortoise who slowly and steadily wins the race. I may reach faster but the strategy is to make it to that magic finish number.
Harsh Batra (LinkedIn)
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