I normally use the bathroom sink first thing in the morning. I presume that’s typical. For a reason I can’t recall one morning the first sink I turned on was in the kitchen. Turned the knob, and… nothing. Uh oh. I migrated to the bathroom sink. Turned the knob, same result. Nothing. Something was wrong with our water line – I don’t remember what it was. It was fixed in a few hours. Not an ideal morning but also not a disaster. In the interim time I kept turning the knob and seeing nothing come out. It felt… strange. Disconcerting. It wasn’t like turning on a power button and discovering the batteries were dead. It was stranger. I decided it was so striking for two reasons…
The first is water is important. It isn’t like being unable to turn the television on. I’ll be just fine without tv. Without water I’m like every other human being. Dead in three days. The second is I’ve turned that water knob a lot in my life. I’m 29 years old and I estimate I turn on a faucet an average of about ten times a day. I probably started turning on faucets myself around 3 years old. (29-3) x 365 x 10 = 94,900. Batting .1000 on 94,900 trips to the plate. And then suddenly I struck out. Running water is a miracle. 100% dependable running water even more so. I never really thought twice about it until turning that knob yielded nothing one morning. After 94,900 perfect reps it became an expectation. Our miracles have become commodities.
I watched an episode of Seinfeld recently and realized it’s no longer a show about nothing. That’s what it used to be about. Now it’s about life before smartphones and the internet. The entire episode I found myself thinking how did they manage that without their cell phone? For those who grew up without cell phones, it’s probably nostalgic. Being part of the first generation to grow up with one, it’s weird.*
More remarkably, accessibility of clean water and the ubiquity of smartphones are only two in a long list of commoditized miracles. Air conditioning, vehicles, Microsoft Excel, stainless steel… a rather long book could be filled with these examples. The point I wish to make here is just because everyone else has access to it doesn’t make it any less remarkable.
The same holds true in the investment world.
Everyone wants something unique. Something different. Hedge funds, private equity funds, venture capital, angel investing, options trading, cryptocurrencies, commercial real estate, NFTs, fine art, royalties… the kind of thing not everyone has. That stuff is exciting. Something you can invest in that impresses people when you mention it at a party.
What about a diversified portfolio of American and international stocks?
You mean what everyone already owns in their 401(k)?
Boring. Where is the fun in that? That’s what everyone has.
Are you sure that it’s boring? Or is it so commoditized, so normal, that, much like your perpetual access to infinite, clean drinking water, you’ve never thought twice about how amazing it is?
I’m currently writing this on Word. Word is a computer application created by Microsoft. That’s the company that revolutionized software and computing. I own part of Microsoft.
As I was writing that sentence, I noticed my phone vibrate as a text message from my wife arrived. It’s an iPhone, designed and manufactured by Apple. The iPhone’s first release in 2007 forever changed the world. I own part of Apple.
I confess, I didn’t remember off the top of my head the year the first iPhone was released – don’t be too impressed. I had to do a quick search on Google to do that. Google changed the world too. You guessed it, I own part of Google too.
A few months ago, we bought my wife a new car. She always wanted a small SUV and has… fine tastes. We looked at BMWs and Mercedes. She chose the Bimmer. Funny thing… we own part of both of those auto makers.
I could go on and on. I own hundreds of companies. Every day I interact with and benefit from their products and services.
Make no mistake, when I say “own” a part of these companies, I mean it in the most literal sense. That’s how stock ownership works. You own the stock; you own the company. You can buy a diversified portfolio of stocks – ownership in hundreds of companies – via an exchange traded fund or a mutual fund. Those boring investments in your 401(k). You can have your hedge funds, your private equity funds, your venture capital funds, and whatever else. I own hundreds of the great companies of America and the world.
Each one of the hundreds of companies I own has a singular mission – to create value for me, the shareholder. They work around the clock, seek to hire the best people, take risks, innovate, and invest their capital wisely. The executives and managers lay awake at night thinking about how to ensure their (my) company’s success. All in the pursuit of profitability, which they happily pay me in proportion to my ownership via a dividend. Some of those companies will become enormously successful. Some already are. That’s great for me, the owner. Others will succumb to the vicissitudes of the free market and be overtaken by their competitors.
That’s fine, I own their competitors too.
Sean Cawley, CFP®
*Not in a negative way. I am still undecided whether the internet & smartphones are a net positive on our society. Watching Seinfeld makes me wish for simpler times…
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