YEAH, WE’VE GOT OUR THEME FOR THE YEAR: MISSION

Color Commentary

When I told my dad this idea to start writing regularly about my Practice, he said “I love it, but you’re thinking too small. You should talk about private companies too, and real estate, and startups, and how Rule #1 investing principles apply equally in all of them.”

The light went on. He’s right.

Investing is not only about public companies – they’re just the most accessible to most of us. It’s much, much larger than that. It’s about tiny private companies and things we buy on the street and online.

In fact, it’s larger than companies altogether. It’s about finding investments that are doing things in the world that I love and want to literally support with my own, hard-earned money – my very pull into investing in the first place. Missions. Some potential investments have one; most do not. For many potential investments, the Mission is irritatingly hard to find. For this first year of The Invested Practice, I want to look at investing through the lens of Mission.

Mission is the topic on which I get the most questions, and I think that’s because it’s so hard to pin down (much like researching management), but it’s the quality that keeps me coming back, because the Mission is the true investment for me.

I’m not interested in speculating or day-trading, I’m not “stock-picking,” and I’m not short-term on these choices. I want to put money into people doing something worthwhile with it, and watch them do their thing. Choosing good investments, whether with consumer money or investing money, is such an integral part of our normal lives that it cannot be separated. That’s how it should be. And if we all did so with our investing money, we would change the world.

Again: HOW do we do that?

First, the internal Mission assessment: What’s important to me and how do I balance it with the real-life problems of a real-world investment? Just as in dating, no one is perfect. But, some qualities in a potential partner are those you get over or even learn to appreciate, and some are straight-up dealbreakers. How do I deal with unsavory things done by otherwise wonderful companies? (e.g., Amazon’s issues with employees – we’ll get to it.)

Second, the external Mission assessment: How do I find information about Missions that is reliable and efficient? What the heck are all these social value acronyms? What about the apps that promise to help us? It seems like now every company has some sort of “we consider our stakeholders” statement on their website – which ones actually mean it? I wrote my law masters degree on socially conscious structures of US companies, (e.g., B-Corps, L3Cs), and I ended up concluding that they are little more than a PR move. Yet, they have proliferated, as they’re a great signaler to us mildly-informed consumers that XYZ Company are the ‘good guys’. See, a PR move – and it totally works. I’m extremely interested in which companies are actually the good guys.

So: we’ll talk about all sorts of Investing Practice topics this year, with an eye towards Mission in this lovely 2019.

READING AND WANDERING

In the very first issue, I talked about how I got into reading about companies, and after a few months, I started to develop perspective and understand the language. How did I do it? I wandered.

The way I started to enjoy practicing investing was wandering around in the weeds of WHAT’S INTERESTING. I let my brain take me where it wanted to go. I just started reading the investing news I was (relatively) interested in.

A sample (fictional, but very based on a true story) reading experience:

  • Grabbed my phone while waiting for my coffee to brew and read a headline about Apple Computer’s stock price or earnings – oh, that’s a company I know something about, I use their products, and I have an experience as a consumer that their phones aren’t as innovative as they used to be, but I still like them decently enough – so I’d read the article about Apple and ignore everything to do with the stock info.
  • It undoubtedly referenced Apple’s Chief Executive Officer Tim Cook – he replaced Steve Jobs? He sounds rather interesting – so I’d search for him online and find a bunch of articles. Found out he’s gay. Not many out gay CEOs around, so that was probably hard for him to do.
  • Started wondering who else is running Apple – who else has been trying to replace the irreplaceable Steve Jobs? – and found Jony Ive is still there, trying to make things beautiful without the guy who could force everyone else to sit up and follow the design. I remember him from when I read that huge Steve Jobs biography everyone read. He’s an incredible designer.
  • Then I’d start thinking – does Apple have a Mission? Not really. I mean, they’ve changed the world twice; first, giving the ability to access computing power to the average individual person with the easy-to-use personal computer, and second, giving the ability to access computing power to the average individual person on a handheld device that’s also a phone. So, in the typical sense, no; in the literal sense, definitely – and pour the coffee.

Results? Nothing in particular. I learned some random info about the guys running Apple. But in the bigger picture, I had just enjoyed reading about a company that was a potential investment. For me, that was an extraordinary thing. I enjoyed it! It hadn’t felt like DOING INVESTING WORK. It had felt like it was part of my life.

This endeavor, which felt so separate from me, had just felt like it was part of my normal life for a few minutes.

That’s wandering. That’s focusing on what’s interesting. That’s how Investing Practice should be.

OOPS THEY DID IT AGAIN, PLAYED WITH MY HEART, GOT LOST IN THE GAME

Case in point, I woke up at the end of November and, as usual, grabbed my phone to see what interesting news there was out there.

First, the Daily Mail. Don’t hate. OK foin, hate all you want, it’s a hack outfit filled with inaccuracies but has a great ability to keep me updated with news of what the British royal family is wearing (Meghan, girl, surely there is one good tailor in all of London who can help you out, amirite?) AND unusual stock market news all on the same front page. Its headline was that the Nissan chairman, Carlos Ghosn, appears to have misused company funds to buy himself real estate all over the world and had underreported his earnings with the help of some other Nissan employees (he’s saying he’s not guilty).

Here’s a BBC article with actual news: https://www.bbc.com/news/business-46334808

I’m not that innocent. I know corporate greed is, like, a thing. That happens. But this Nissan exec news really bugs me. If he did it, there’s no way he pulled this off alone. Don’t these companies have any ethics? Why does this exec-lies-and-steals story keep happening without the executive getting caught over many years?!!!

I’ll tell you why. Two reasons.

1) the major shareholders either aren’t paying attention or don’t care, and
2) management has too much leeway from the Board of Directors to do whatever they want.

I am an optimist about people, and I refuse to believe people don’t care. Indeed, this news came out because of a whistleblower within Nissan reporting the misconduct to the company auditors.

I’ve been kind of curious about Nissan since reading this news. With full 20/20 hindsight, could I have detected that there was something janky going on here? Maybe this is more of a Management issue, and not even really much to do with the company’s Mission overall. Does Nissan even have a Mission at all?

There are two levels to this:

1) I don’t want to lose money by investing in a company that’s going to go down because of bad actors. Simple and obvious, right? And,
2) I want to feel connected to the power of my money.

If I were an investor in Nissan, that guy would have just allegedly misused and/or money from me as a shareholder. Is this Nissan event an opportunity or something to steer far away from?

A company listed on a non-US stock exchange may not be the best place to start The Invested Practice. Non-USA reporting requirements are different and different means I don’t know what’s normal. A LOT of Investing Practice is about knowing what’s normal – just like my legal practice. I’m accustomed to the SEC filings. But, this is where I was practicing my investing in real life when I was thinking about Mission for The Invested Practice, and particularly thinking about how safe a company is to invest in, so this is where we are starting.

Real investing practice is messy and often – usually – not quite to the point you expected it to go.

I drove, and loved, a Nissan Xterra when I started learning about investing, and Nissan was one of the companies I originally listed when my dad asked me at the very beginning of this journey to think about my Circle of Competence. Buffett defines the investing Circle of Competence as your sweet spot – the stuff that is easy to understand. For him, it’s Nebraska Furniture Mart, not Microsoft.

A great place to start is with the stuff we already use.

I keep notes of all my company research…no, let me rephrase. I TRY to keep notes of all my company research. So I went to my notes and searched “nissan”. Got nothing. I guess I wasn’t taking notes back then at the very beginning. I took a beat, and noticed how far I’ve come in a few years, from a time when I would have had no idea how to even start to research Nissan, to now trying to run down what the heck this dude was doing. It’s probably still “Too Hard” for me, but whatever. It’s about practicing.

PRACTICE: NISSAN

First, I read the BBC article down to the infographic about ownership between Mitsubishi, Nissan, and Renault. Oh my gosh – it’s complicated. I’m not saying I can’t understand their ownership structure if I try, but do I want to try? Nissan was fast falling into my “Too Boring” category of companies. Often I’d quit right there. But, I was curious still.

I wanted to look at least one annual report before quitting, so I searched online for “nissan investor relations” and got their Investor Relations website.

On the left side, it said “TSE Filings” which sounded close enough to “SEC filings” that I figured it probably had something to do with securities filings. Bingo – list of yearly filings showed up. I clicked on 2018, and – nope, this was only news releases and notices. Same for 2017. I was in the wrong place.

Non-USA stock exchange companies are hard because all the words are different, which is a rather obvious thing to say, but frustrating as it happens to you. Went back to click on “For Individual Investors”. Nothing there that indicated an annual report. Finally I scrolled down and found that in the “IR Library” were some links to an Annual Report. Voila. Got it. Finally.

Wow, the report was short. 19 pages. Compared to the hundred or more pages a typical SEC-compliant company has in its annual report, this was nothing. It had no disclosures, no risks, no footnotes to the financial statements. Without footnotes, I wasn’t sure how to find the misused company funds – it’s probably something in the compensation information notes. Which didn’t seem to be here.

My interest was waning, and I didn’t feel like going looking for the footnotes in a separate document on the website. I’m sure they’re somewhere on there. However: Nissan has already said they’ll have to amend their financial statements, and THAT will be interesting. Free education on what to look at closely when it comes to executive compensation. I’ll be looking for that.

Turned out that what I initially pegged as a failure of Mission, seems a lot more like Management. Actually, Mission-wise, I learned that Nissan had some interesting goals regarding electric car development in their Annual Report. A real Mission? Kind of interesting.

And with that, I saved the Nissan 2018 Annual Report in my new “Nissan” notes folder and made a note to myself to re-look at the financials after Nissan issues their revised documents. And stopped there. Nissan was “Too Hard” for me that day, and that, paradoxically, made me happy. I learned something new and finished quickly. Onto the next…if this one doesn’t stick in my mind.

LET’S GET PRACTICAL:

LET’S GET PRACTICAL

Practice wandering. No big thing, just start right where you are. Steer to the business or tech pages of any reputable news source, find something interesting, and just start going. If you hit a dead end, try a different source. Go till you’re bored or out of time. Then, do it again tomorrow 🙂

Intriguing articles to get you started:

Venture Capitalist Fred Wilson’s Predictions for 2019

Brexit just keeps on keeping on

Numbers, numbers, numbers on the potential Uber IPO

Oh, speaking of Apple, they aren’t selling as many of their “cheaper” (ha!) phones (paywall)

Ownership Disclosure: Danielle Town owns shares in Berkshire Hathaway (BRK) .

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