20 years ago Friday, Buffy the Vampire Slayer debuted on television, and the Internets are justifiably full of anniversary tributes to this most excellent show. So what better time than for me to admit this simple, perhaps silly truth: (Almost) everything I need to know about investing, I learned from Buffy-timeless wisdom about how and why stocks grow and thrive over time, creating wealth for all of you dear readers.
Don't worry, you needn't watch all 145 episodes to soak up this knowledge. It all comes from three snappy quotes, which I'll share with you here.
That's the reason I love this country. You make a good product, and people will come to you. - Season 3, Episode 6
So said Trick, a vampire teaming with a con-artist to peddle evil candy bars to the good people of Sunnydale, CA. For our purposes, the quote is more useful out of context-it's pure Hayek, the notion new supply creates its own demand. Or to borrow from Field of Dreams: If you build it, they will come. One school of thought suggests demand comes from having the resources to buy things, whether from your salary or a check from the government, and that's true enough in technical terms. But that doesn't necessarily explain long-term economic growth and technological advancement, because it doesn't explain why companies strive to create new products you never knew you wanted. The iPhone didn't take the world by storm because the government decided to stimulate smartphone demand. It happened because Steve Jobs dreamed the thing up and made you want it.
This is why the future holds limitless potential for earnings and stocks. As long as technology keeps moving forward-as Moore's Law and its siblings say it will-then there is the potential for firms to keep creating new things we never knew we wanted and profiting along the way. And for other firms to spin that tech into a new service or non-techy consumer product. And for still other geniuses to combine tech A with gadget B into the greatest gizmo of all time. When you own stocks you own that potential, which is why they are the best way to build long-term wealth.
So I've been reading a lot about the good ol' U-S-of-A, embracing the extraordinarily precious ideology that's helped to shape and define it. ... Capitalism. A free market dependent on the profitable exchange of goods for currency. A system of symbiotic beauty... - Season 5, Episode 12
That poetic description comes courtesy of Anya, a thousand year-old ex-demon (and Communist sympathizer in revolutionary Russia) who turned good and helped run the local magic shop. Now, this isn't about whether capitalism tops freedom and democracy among the pillars of American society. Rather, it's about that bit at the end-the symbiotic beauty. These days, it's fashionable to think of capitalism as antagonistic. The haves and have-nots. The One Percent and the rest of us. But that's all sociology and irrelevant to stocks. Stocks care more about that symbiotic beauty, where I give money to my local yarn shop in exchange for a delicious, bright blue alpaca/silk blend. They are happy because they made a profit, which keeps them in business and helps the owner and employees earn a living. I am happy because I have pretty yarn. The gal who spun and dyed the yarn is happy because the shop will keep stocking her product, so she can keep making a living. Everyone wins! Multiply that by a jillion gazillions and you get the global economy. A big, wonderful exchange of money for goods and services that makes all who participate better off.
"Yah, but the company owners benefit the most!" is an objection you might hear to the above, but the beauty of our modern capitalist system is that we can all be company owners! Whether you have a hundred dollars to invest or exponentially more, you can buy a little slice of the market, and you can own the companies and get a slice of their profits-either through dividends or the growth that comes when management reinvests those profits. It's beautiful symbiosis. We all win.
But you have to try online trading, it's great! The secret is avoiding the tech companies everyone was jumping on, and going with the smaller firms that supply the basic components. - Season 5, Episode 15
Another from our pal Anya, describing her stock investing success and secrets. Now, this episode is also guilty of encouraging a get-rich-quick investment mentality, as she brags of tripling her money in a short time. But set that aside. It also aired in February 2001, as the dot.com bust was escalating, so the market-timing advice is off. But set that aside too, because buried within are a couple key lessons on how to think about hot trends.[i]
First, beware of a widely hyped investment story, like those paper-thin dot-coms in late 1999 and 2000-it's frequently a sign of euphoria, when markets have priced impossibly high expectations. The best investments are often the unloved categories-those considered boring, bad or unglamorous for no good reason. Tech stalwarts, as opposed to recent hotshot IPOs. You know the one.
Second, when you want to invest in a new technology-be it 3D printing in recent years or perhaps drones today-it's tempting to go for the thing itself. But that isn't always the best investment choice. Partly because there is a lot of hype, partly because the industry might be so new that there just aren't enough viable (read: non-speculative) investment options, and partly because the real potential lies elsewhere-with the component suppliers, or the creative users who use that technology to build their own business. You didn't need to own 3D printer producers to capitalize on that technology-Industrials firms using 3D printers to cut costs and improve products were a wonderful way to seize the day. With drones, perhaps the real opportunities are with online retailers or logistics firms using bots to deliver packages, or maybe in a few years when someone uses drones for something I can't imagine today. If you like cloud computing, you don't need microcap cloud-based tech startups-you can just own the firms that provide the cloud storage. They'll benefit too. Before SoftBank snapped it up post-Brexit, ARM Holdings grew to be the UK's biggest tech firm by supplying chips for smartphones. Its name wasn't on sleek products you could buy over the counter, but it created plenty of wealth for shareholders.
Now, I'll admit this column's title is a bit oversimplified-after all, to my recollection, Buffy skipped over compound growth, devising asset allocation and diversification, and those are biggies. But still, these snippets taught me a lot in my youth, and they stuck with me for years and years. So thank you, Joss Whedon, for helping train this little capitalist. (And for giving the world Anya's Dance of Capitalist Superiority.)
[i] Incidentally, this episode was about a guy who created an android that could have given Star Trek: The Next Generation's Data a run for his money (if they used money in Star Trek, which they didn't).
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