Yesterday I introduced the three lessons I learned from my conversation with Dr. Andrew Wittman. If you haven’t read the intro post, check it out here. Also, make sure to listen to our conversation on the Value Hive podcast.
To review, the three main lessons I learned were:
- Be Proactive, Not Reactive
- Knowing Your Mission and Purpose
- Clear Thinking = Clear Communication
Today we’ll chat about the second lesson, Knowing Your Mission and Purpose. If you don’t read past this, here’s the main takeaway:
If you don’t know your mission or your purpose you’ll fall victim to the random gyrations of the market. If you don’t have an anchor, how can you stand firm amongst the waves of volatility?
Let’s get it!
Lesson #2: Know Your Mission and Purpose
“Without purpose or identity, you’re floundering. There’s no anchoring, there’s no anchor.” – Dr. Andrew Wittman
Knowing your purpose and mission is top-priority. It’s crucial in life and relationships. It’s also vital in financial markets. In a world where there’s thousands of ways to skin the cat, knowing your identity gives you a foundation on which you (hope to) build market fortunes.
During our conversation, Dr. Wittman used the analogy of Dorothy and the Yellowbrick Road. Each character had a reason for walking that road. As Dr. Wittman eluded to, “the only reason they put up with [the witch and storms] is because they had a final destination.”
At the end of the day, market participants have two main purposes:
- Not to lose money
- Make money
Sure there’s nuances and variations to strategies. But at first principles, those are the only reasons people engage in financial markets.
So we know our purpose. Do we know our mission? Can you define your mission? The purpose is to not lose money and to make money. The mission provides the steps necessary to get to your purpose. Our mission is our Investment Style.
The Different Colors of Mission
Like we mentioned earlier, there’s thousands of ways to make money in markets. Even where we live — the value investing space — there’s different styles. Walter Schloss invested in hundreds of stocks at a time. He allocated around 1% of his capital to each investment. His returns? Over 20% compounded for 18 years.
Ben Graham invested in a less diversified manner, but still owned around 50 net-net stocks. He did well. Charlie Munger’s early partnership days involved large bets on three-to-five stocks. While more volatile, Munger walked away with market-beating returns for over a decade.
In each example, the mission differed, but the purpose stayed the same.
Mission also applies to geographic regions. For example, Prem Watsa delivers his mission in Canada. Li Lu enacts his mission in China. Where will you make your mark? Where will you deliver your mission?
How To Find Your Mission
Finding your mission takes time. Your mission, your investment style, should hit certain criteria:
- Does it fit your personality?
- Does it fit your time horizon?
- Does it work within your schedule?
- Does it stand the test of time?
These are questions you’ll find out as you learn, study and try out various strategies (various missions) throughout your learning process. What works for one person might not work for you. And that’s okay. You’ll grow as an investor and find out what works best for you.
Maybe you’re a fan of Schloss and want to spread your bets. Maybe you don’t have enough time to search for one hundred net nets and decide Munger’s old way works best.
Don’t Be Afraid To Optimize Your Mission
Markets don’t exist in a vacuum, neither should your investment style. Don’t believe me? Look at Warren Buffett. Buffett went from Ben Graham cigar butts to great companies at decent prices.
If Buffett (perhaps the greatest value investor of all time) can change his mind, why can’t you?
Remember, it boils down to mission and purpose. Your purpose stays the same. Your purpose never changes. The mission is what gets you to your purpose.
Tomorrow we’ll discuss the third and final lesson learned: Clear Thinking. In the meantime, check out my conversation with Dr. Wittman here.
That’s all I got for today. Shoot me an email if you come across something interesting this week at email@example.com.
Your Value Operator,
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Student of value investing for over 13 years spending his time in small to micro-cap companies, spin-offs, SPACs and deep value liquidation situations.