The Pursuit of Knowledge and Winning
August 15, 2017
Author: Bianca Yang
College is not the place for you to explore your interests. The entire purpose of education is to fill your mental toolbox with useful skills. For example, math and science and engineering principles that will allow you to perform meaningful work. Skills like critical thinking and qualitative analysis and speaking skills are important but are developed through practice and are hard to teach.
As a student, it is my responsibility to make sure I take opportunities and develop skills that make me increasingly able to create my own work and vision for society or to fulfill another vision at their company. Each job and opportunity I take on is part of my portfolio of experiential investments. Each opportunity’s risk/reward profile should balance and enhance the value of the entire portfolio. These are the same concepts one encounters in investing with money, which is why I believe fundamental investing principles are an extension of life principles.
I am going to pivot into talking about investing. The value of an investment is commonly described as the discounted value of its free cash flows. For stocks, this is frequently dividends; for bonds, it is the cash payments. There is a lot of trickery involved in building discounted cash flow models, including that most of an investment’s value is in its terminal value and that it’s extremely hard to predict growth and discount rates. One could argue that stable companies have predictable returns and are easy to model. I say, never take stability for granted. Stability one day means death the next. Anyone who’s read Jeff Bezos’s original letter to shareholders about every day being Day One for the Internet should understand.
The world is constantly changing. Just because you achieved success 20 years ago and have managed to live off your profits and six sigma leadership structure and cost-cutting strategies for the subsequent 20 doesn’t mean you will live to see the next 20. Every generation brings a new group of hungry, angsty, dissatisfied humans who want to destroy you, uproot you, and overtake you. They don’t care about how you want to do things or how large your workforce is or who your CEO is. They just want to win. And that’s what you should be looking for in an investment. The investments where you are really going to make money are the ones where the founder is still in place, churning away at his vision to win and make the world a better place, the company is growing like crazy (frequently beyond it’s capacity to handle growth), everybody believes in the company (stock price just keeps going up), and you believe in the mission.
Investing is as much a personal journey as it is a money-making one. You’ll discover all your heuristic biases over and over and over again, as you ride on the unending financial and emotional rollercoaster of the markets. And it’s good for you. Because it’s one way for you to live vicariously through the achievements and failures of great people. You have your pick among FANGTS (T and S for Tesla and SpaceX), the incumbent car and tech companies (Intel, IBM, Ford, GM), the banks (JPM, Wells Fargo, BoFA), commodities (oil, corn, soybeans), and so many more sectors. And you get to decide how you will support each industry by putting your dollar behind any of the companies who are fighting for supremacy in their area of expertise.
If you don’t feel comfortable betting on any of these companies, you can choose from a variety of financial advisors, automated advisors, ETFs, indices, mutual funds, etc. There’s a lot of names on the market, from Motif to Wealthfront to Blackrock to Vanguard to iShares, and counting. Choose what makes the most sense for you, given your ability to handle risk, your financial independence, and your faith in the people who are running the world.
Back to college. Focus on turning knowledge in action. Engineering and science and math are easily turned into action. Each of these disciplines is essential for driving progress and raising the standard of living. This is why reading is a dangerous activity. In fact, reading is the ultimate lazy person’s excuse. Anybody can claim they are reading and receive a quick nod of acknowledgment that they are being productive with their time. We do live in the Information Age. But, when someone grows so concerned simply with gaining more knowledge over using that knowledge to create useful insights or products, all their time and effort spent reading has been wasted.
Every action must be purposeful. You may not have a plan for taking your knowledge now, but you must be able to chart a direct course that shows how this knowledge could be useful in a future endeavor. Reading math and science and engineering textbooks is useful because you can use that fundamental knowledge to build rocketships, design software, create a water purification system, etc. Reading science fiction novels, which shown to be correlated with the rise of high-tech CEOs, is hard to justify the ultimate use of. Perhaps science fiction novels stand above the traditional literature classics, though, because most liberal arts majors haven’t yet found a place in society that truly serves the populace. All those dreary, dense essays expounding the virtue and “The horror! The horror!” of Conrad have yet to enrich my life.
Every day of your life should be spent improving your skills and your abilities so you can make a difference in the world.