There were some really fun/good replies to this tweet that was referring to how recently funded startups but super expensive chairs. The one reply that stood out to me was a link to this post written by Tren Griffin on Things [He’s] Learned From Fred Wilson. #5 on that post talks about how expensive equity capital and the importance of not spending it on expensive toys for your company. He adds another way of looking at this, through a Buffet-ian lens. I have highlighted it below. Overall, the paragraph resembles a similar conclusion, from a personal perspective, I came to a few weeks ago.
Being somebody who’s curious in general, likes to tinker, and always wanting to play with the newest things I end up messing around with a lot of new software, apps, hardware, and gadgets. In general, I think this is super valuable, especially if you want to make build products/make investments as the earliest stages since a lot of new things starts as toys or not mainstream, by definition. Most of those things are usually just time-consuming and cost a marginal amount of money from your personal cash flow except for gadgets. The latest gadgets *usually* don’t end up being the significantly more product than the gadget that they are replacing: the newest iPhone, newest MacBook, Camera, drone, GoPro, wearable, you get the idea… So instead, what I’m experimenting with is: If I think I would’ve bought this item before doing this experiment, I’m going to buy the equity into that company instead. If the stock is not publicly traded, I’m going to buy an adjacent/related stock that is. Not just applying this to gadgets but any ancillary spending that’s not food & transport. If I do need to make the purchase, I’m going to try and match the spend with an equity purchase. Also, if a spend a LOT of time on the service, that to warrants buying equity in the service. In the two months, I’ve bought a few shares of AAPL, TWTR, TSM, LULU, JWN, FIT, SQ, ZEN
The most obvious outcome is that I, likely, own assets that don’t depreciate as fast as the goods I would’ve otherwise. I hope to god that is true because if that isn’t true that would really suck.
Also, I’ve never really traded public equities before this but I think I’ll learn some things about the company and how others (public/bigger funds) thinks about these stocks since their motivation is obviously very different from mine. The reason for my purchase was just intent to buy/interact with their goods and its possible that good products/services (I like) ≠ good businesses (the world values). Looking at things retrospectively should also allow me to build a better filter for instances, in the future, that need independent thinking. I may also be able to evaluate what kind of returns some of the toys/services built by public market companies, that I interact with, have. It’ll also, over time, let me track what structural changes have happened in the industries they operate in .
Again, the main motivation here isn’t extraordinary financial returns because this would be too easy of a way to make money, and anything that is easy has its advantages to competed away as Howard Marks writes here. Additionally, in his words this is a classic example of first-order thinking. I do want to use this as a way to spend less, and skim over annual filings to become familiar before deep diving in the future.
Disclaimer: I am not giving you investment advice of any sort. This is just an experiment I am doing for myself.