Iterations are steps not failures
“I have not failed. I’ve just found 10,000 ways that won’t work.” –Thomas Edison
There is more to gain from our failures than our successes, because we fail more times than we succeed. That’s how anything great comes into existence – through iterations.
In this one:
Patience
Strategy
Legends
Also, some big words, big mistakes, big numbers & big names. Let’s grow.
STORY
Good things take time pt. 3 — You can have your cake and eat it…if you wait
No one knows everything, but those who have walked a path ahead of us probably know more about it.
When learning about investing, it’s almost impossible not to mention Warren Buffet. His success with stock market investing has earned him the moniker, ‘The Oracle of Omaha’. An oracle is a person who is considered to give wise counsel and ‘prophetic predictions’. His track record over time has made him seem like he could ‘see’ the future.
Many things stand out when you look behind his net-worth. But big numbers are great to look at. He is currently worth over 150bn US dollars, and he intends to donate nearly all of it.
His company, Berkshire Hathaway, again outperformed for the year 2024. They recently confirmed that they paid more in U.S. income taxes in a single year than any other company ever had. Their payments, $26.8bn for the year, are about 5% of all U.S. corporate taxes paid for the year. A single company! This puts Berkshire’s performance into some perspective.
He figured out capitalism. He studied, practiced and was patient.
It’s easy to see why he’d be considered an oracle. Yet his success hasn’t come without mistakes, which he openly admits to (even last week). Having bought his first stock at age 11 and now 94, he must have made a couple. And still, he is where he is.
Much has been said about him but here are three insightful gold nuggets from the good old sage:
One on knowledge:
"Risk comes from not knowing what you're doing."
One on patience:
“The stock market is a device for transferring money from the impatient to the patient.”
One on compounding:
"My wealth has come from a combination of living in America, some lucky genes, and compound interest."
Every year at the end of his letter to shareholders, there is a comparison of Berkshire’s performance vs the S&P 500 (a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the US). It is a public record of his company’s performance against the market and in it you can see how often he has outperformed the market. More importantly, you can see what the difference in annual compounded gains means for his overall performance.
In the 60 years between1964 and 2024, the compounded annual gain in the S&P 500 has been 10.4% against Berkshire’s 19.9%. The difference may appear small, but this is compounded annual gain. What it has translated to in overall gains is 39,054% for the S&P 500 market against 5,502,284% for Berkshire.
That’s not a big difference. That’s an astronomical difference. And that’s why he is who he is – a legend.
Compounding has been a cornerstone of this success. I’ll soon cover this concept in more detail, but you should look at last week’s annual letter to shareholders for yourself.
Successful investing—if Warren knows anything about it—isn’t about quick, fleeting wins but about slow, steady, and often boring consistency. Patience pays.
EXPLAINER
Bond vs bond fund pt. 2: Shaken or stirred?
If you’ve ever considered or actually gone ahead and invested, you know that there are many questions that you must answer before you eventually do. But are you asking yourself the RIGHT questions?
In the first installment of this series, I shared a reader’s question to walk you through fundamental principles I introduced earlier this year. Today, strategy.
Strategy: Your decision-making blueprint
In investing, your strategy is the guiding framework that helps you decide how to allocate your money.
Your strategy helps you focus and make decisions that align with your objectives. In a sense it keeps you proactive rather than reactive. This is a good thing.
In this instance, the questions that follow will demonstrate how strategy serves as a guide for your decision.
Are you investing primarily for steady income, capital preservation, or long-term growth? (Desired returns)Individual bonds offer fixed interest payments at regular intervals–predictable income. Holding high-quality government bonds directly comes with some certainty over when they mature and get your principal back–capital preservation.
On the flip side, well managed bond funds may offer better long-term growth even if the income varies, due to exposure to different bonds (diversification).
How much risk are you comfortable with? (Risk tolerance)Individual bonds offer more certainty if you’re sure you will hold to maturity–you know the interest rate, the maturity date, and the return you'll get.
Bond funds fluctuate with market conditions, meaning returns vary, but they reduce the risk tied to holding any single bond (again, diversification).
How long do you plan to invest? (Time horizon)If you have a specific end date in mind (e.g., saving for a major expense in 5 or 10 years), buying individual bonds lets you lock in a maturity that aligns with your timeline.
If your investment is open-ended with no fixed withdrawal date, bond funds provide better value by constantly reinvesting interest (and ongoing compounding).
How involved do you want to be? (Management style)Buying bonds directly requires more work. You’ll need to track maturity dates and reinvest proceeds yourself. Spreadsheets, anyone? With individual bonds, the interest may be too small to buy the same or another bond & you could lose time.
Bond funds offer a hands-off approach, as they are actively managed and automatically reinvest in new bonds. They hold bigger positions as they pool the funds of multiple investors, making reinvestment more effective.
How quickly might you need access to the money? (Liquidity)Bonds have a set maturity date, so your money is tied up unless you sell in the secondary market. The challenge with this is that for smaller markets, you can take a considerable ‘haircut’ in price for a bond of low face-value.
Bond funds solve this for retail investors due to economies of scale. They’re able to give you your money on demand a lot faster than it would take to sell a single bond if the need arose.
Next up: Your investment plan
Strategy provides direction, but it’s your investment plan that determines the specifics—how much to invest, which bonds or bond funds to choose, and how often to make adjustments.
In the next part of this series, we’ll explore the role of an investment plan in shaping your decision and ensuring your investments align with your goals.
For now, reflect on your current investment strategy. If you don’t have one, answering these questions for your own situation is a start & well worth the time.
NOTES
A litany of failures is the sacrifice of legends
“Legend” status isn’t earned in a day. It also isn’t achieved by everyone.
But through generations, we remember their names.
We remember them for their wins because that’s what we attribute success to. But they know their wins came through countless failures. Sometimes in epic proportions.
They know how many times they missed the mark, probably more than they care to remember the times they hit it. There’s a reason.
It takes real courage to bet on yourself when the outcome is uncertain. It takes real character to do it again and again.
What separates legends from the rest is what they do with their misses. The ordinary person gets dispirited. The legend returns to the drawing board, and starts to work on what they’ve exposed.
They analyze the details and seek to improve.
“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”
–Michael Jordan
Each failure increases your probability of success. With each ‘failed attempt’, your odds of winning are only going up.
So fail. Fail again. And again even.
Like the insurance sales-guy that keeps coming back. Persist to a fault.
Not through repetition, but through iteration.
When you’re knocked down, many people think it's enough to simply get up. It’s not.
The smart players know at that moment, there’s something to learn and adjust. And that's the counterintuitive beauty of iteration.
We have evolved through iterations. If only the strong survive, then we know how legends are made.
“Impatience with actions, and patience with results.”
–Naval Ravikant
Reframe
If you ever had to choose, would you take 1,000 more misses? And would you try again? 1,001, 1,002, 1,003…
Starting over means you believe that it isn’t over. That you’re still in the game. That you’re one failure closer to success.
And that’s legendary!
AG
📢Announcement:
Understanding your core beliefs around money is a critical first step in investing that’s easy to overlook.
& I have been iterating on the masterclass we started running earlier in the year to help people align their investments with their life goals. Find details of the upcoming one here & register if you’re interested & available.If you enjoyed this edition of Unstructured Notes, click the ❤️ button so more people can discover it & feel free to share it with friends!
"What separates legends from the rest is what they do with their misses..."
Knowing that Warren made a mistake while purchasing his company that cost him two decades of a headache but still managed to build it into what it is asserts your statement above.
This was such a practical edition for me. I spent time answering those questions putting together my strategy and refocusing my life foals.
So many of the past editions continually make sense as I have an even deeper appreciation for having an investment thesis much like Warren's is equity first.
You're not just making this stuff up but equipping us to invest for the long haul...a.k.a investing for life.
Thank you for your service 🙏🏾