With the dawn’s light clouded by a thick overcast, I stood in my backyard in a raincoat, watching Martha the puppy sniff our fenceline perimeter. She required my devoted attention at that early hour for two reasons:
- Just in case she sniffed into something stupid, like the freshly “bloomed” overnight mushrooms (do mushrooms bloom? deep question…). Dogs shouldn’t eat mushrooms. Martha doesn’t know that.
- Much like with human babies, it’s good to have an idea of when a puppy last did her “business”
Thankfully, Martha was quick. After 10 minutes in the drizzle, we trudged (a.k.a. sprinted with the gangly energy only a puppy possesses) back inside.
As we dried off in the kitchen, a beep came from the countertop as final drops dripped into a hot, fresh pot of coffee. While I stood in the rain, my attention 100% focused on the puppy, this simple machine devoted time and effort to brewing coffee. It worked while I worked.
Therein lie 3 simple, important investing lessons.
Lesson 1: Some Effort Required
A coffee machine only works if you set it up. Clean out yesterday’s coffee, pour in cool water, add fresh grounds, press Start. You need to make the effort up front, then the machine works its magic. Pressing “Go” on an empty coffee machine does nothing!
Investing is the same. You need to invest your dollars up front. Growth only comes after investment.
This is especially true while you’re young. For most investors, their first 15-20 years of investing should be heavily focused on adding more investment principal. Their savings rate is more important than rate of return. Save more dollars. Set up more coffee machines.
Lesson 2: But Don’t Hover
Does the coffee machine work better, faster, or brew tastier coffee if I watch it like a hawk?
Of course not. Watching the coffee machine is wasted time.
Similarly, hovering over your portfolio is wasted time. In fact, if your hovering triggers interference (“I’m down 3%? I better step in a do something about it!”), not only are you wasting your time, you’re also actively harming your long-term outcomes.
Lesson 3: We Need Levers
Both investing and coffee machines are levers. They take our small inputs and turn them into larger outputs. Levers like this exist everywhere we look.
- Imagine if humans only traveled by foot, as our ancestors did? Over millennia, we’ve created better and better transportation levers. What a fundamental shift!
- Or what if every conversation still required face-to-face interaction? Bye-bye blog. Humanity has levered up its communication skills over the years. First came writing, then printing, email, telephone, Zoom…THE METAVERSE?!…well, maybe not the Metaverse…but you get it.
- When did you last think about your drinking water? Without levers (figurative and literal), you’d still be lugging buckets from the nearest stream.
Levers are essential to all facets of our lives. Investing is one of those levers (and so are coffee machines.)
Investing sets aside today’s excess resources and allocates them elsewhere in the world where they can be put to productive use. In return, we ask for more resources back than we initially put in. We make a short-term sacrifice for a long-term levering up.
Cream and Sugar?
Investing, and life, are filled with ways to increase our human efficiency. Coffee machines are a simple example. Your investing portfolio is another.
Go walk your dog. Play with your kids. Live your life. And let your portfolio work for you.
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-Jesse
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