Wealth is the Control of Time

The case for multi-generational investing

Hey, you are reading the guest segment of Investment Talk, where I invite friends of the newsletter to share thoughtful essays, conduct interviews, and collaborate.

Today’s guest essay comes from

Six Bravo

the authors of

Special Situation Investing

. The duo are known for sharing actionable ideas from the stock universe, as well as their insights into process, mindset, and various thematics they research. The work is high quality, so I recommend checking it out. Today’s essay focuses on the case for multi-generational investing, as well as reflecting on Keynes’ predictions for where society will be by the year 2030. He got a lot right; like predicting the efficiencies of labour that technology would bring. But he also missed the mark in a few areas too.

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Wealth is the Control of Time

The Case for multi-generational investing

Six Bravo

When you think about it, money is a funny thing. Over the centuries, a diverse list such as seashells, massive stones, gold nuggets, salt, beaver pelts, and pieces of paper were all accepted as money. For many people today, money is just pixels on a screen. While certain forms of money performed better than others, its function remained the same across millennia—to enable time and energy expended in the present to be exchanged elsewhere and at a later date.

Money is essentially a battery for time and energy. Consider how, Monday through Friday, we dedicate time and energy to our nine-to-five job. In exchange, we receive money, hopefully, commensurate with the amount of time and energy expended. We then use this money to command someone else’s time and energy, for example, to drive us across town or to grill our favourite burger. Alternatively, we can save it with the intention of employing it later.

Andrew Lokenauth, the author of the Fluent in Finance Newsletter, recently noted the connection between money and time. He put it this way:

“Time is your most valuable asset, don't waste it. If you make $20/hour, that night out isn't $300, it's 15 hours of your time, or 2 days of work. If you make $20/hour, that car isn't $50,000, it's 2,500 hours of your time, or 357 days of work. Framing purchases in time instead of dollars can help you make better-informed decisions with your money”.

That last sentence is gold. We believe the same can be said about wealth. Flipping those types of calculations around shows the connection between time and wealth. If you make $20/hour, and you’ve saved up $50,000, that’s essentially 2,500 hours or 357 days you don’t have to work. Or better yet, save up $1,250,000 that’ll pay you $50,000 in interest and you may not have to work again.

While most people measure wealth in terms of money, true wealth is ultimately about controlling one’s time. Time, after all, is the scarcest of resources. This concept isn’t new. Its most recent incarnation is the financial independence movement where the goal is not money for money’s sake but money to free up time. We think for the majority of people, money isn’t the goal but instead being able to spend our limited number of days as we deem best and with those we love most. We first heard wealth described as the control of time by the eclectic American polymath, Buckminster Fuller. But it was while reading an essay by John Maynard Keynes that we understood the harsh truth of its accuracy and it caused us to see the world differently.

Keynes’ Foresight

The essay, Economic Possibilities for our Grandchildren, was written in the depths of the Great Depression in 1930. In it, Keynes argued, although conditions appeared dark, the years ahead were bright for future generations. Looking to the year 2030, Keynes hypothesized humans would have solved "the economic problem," namely, the struggle for subsistence. He believed this would be accomplished through the power of compound interest and efficiencies brought about by technology. He argued humans would be free to spend time on nobler tasks than the accumulation of money and a 15-hour workweek would suffice to scratch the itch for those who still felt compelled to work. 

Come to find out, Keynes was right about a lot. High rates of compounding and impressive technological efficiencies persisted over the decades since. On the one hand, as an approximation for the general compounding of interest, the United States stock market produced an impressive average rate of return of around 9%. On the other hand, as an example of technological efficiencies, before the wide acceptance of mechanical farming equipment and fossil fuel fertilizers, 83% of Americans were farmers. Today, farmers make up less than 2% of the population. So while the past century reveals Keynes got a lot right, somewhere in the mix he got something very wrong. His thesis—greater prosperity will lead to the ability to choose how to spend time and less mandatory work—didn’t pan out. While the weekly hours worked by the average American decreased slightly, it’s nowhere close to the 15 hours predicted by Keynes.

In all fairness, Keynes did jot down some caveats. He thought four things would control the rate at which we solve the economic problem. They were:

“Our power to control population, our determination to avoid wars and civil dissensions, our willingness to entrust to science the direction of those matters which are properly the concern of science, and the rate of accumulation as fixed by the margin between our production and our consumption”.

So What Went Wrong?

From our point of view (which is admittedly pro-free market), we believe the majority of Keynes’ caveats have come to pass enabled by the debasement of fiat currencies, aka inflation. Money that can be printed on a whim can pay for one war after another, can fund energy sources that put ideology over physics and can finance massive national deficits at the expense of future generations. Like a credit card in the hand of a drug addict, it provides a high, the cost of which, is a lower quality of life in the long run. As 2030 is less than seven years away, it’s clear the alternate reality envisioned by Keynes will be missed by a wide margin. The majority of people will unfortunately still need to concern themselves with the accumulation of money. It’s likely not going to get easier anytime soon. The mountain of global debt must be dealt with and the path of least resistance appears to be further monetary debasement. Harking back to the imagery of money as a battery for time and energy, today’s money is a leaky battery…and the leak is going to get worse.

As a society, we’ve failed to reach the level of wealth and independence predicted by Keynes, but for those willing to undertake the challenge, building true intergenerational wealth remains within our grasp. The answer to solving the “economic problem” today is the same as it was in Keynes’ day; greater technological efficiencies and the compounding of capital. The first path, creating economic efficiencies through entrepreneurship, is probably the single greatest catalyst to wealth creation in history. If you happen to be the bold entrepreneurial type with a society-enhancing idea, then more power to you. But that isn’t us and we consider it outside of our circle of competence. We prefer to leave this part of the equation to the Steve Jobs, Elon Musks, and the “mom and pops” of the world.

We believe the way we can provide a better future for ourselves and our kids (and benefit society) is through the efficient allocation and patient compounding of capital over a multi-generational timeframe. That last part is key. The “finance industry” does its clients a disservice by focusing on the short term. High-turnover portfolios do a wonderful job of generating management and brokerage fees but they’re lousy at capturing long-term outperformance for investors. While we feel bad for those whose capital is whittled away by trading fees, we can’t do anything to change that situation and their loss is our gain. Oftentimes, it’s the very short-sightedness of a majority of market participants that create opportunities for the rest of us. In our view, good old-fashioned, long-term value investing is still the style that offers investors the best shot at capturing outsized returns.

Buffett may be the most famous zealot of this investing style but he’s certainly not alone. One lesser-known investor who convinced us specifically of the importance of leveraging a multi-generational timeframe is Anthony Deden, founder of Edelweiss Holdings. Listening to Deden talk, or when reading his journal articles, it’s clear he’s not your typical investor. First off, he purposely removed himself far from Wall Street and does his investing within sight of the Swiss Alps. In a not at all subtle hint at his disposition toward investing over trading, he refers to his investments not as stocks or securities, but as company “participations.” But most importantly, his multi-generational investing time frame comes through loud and clear. In Grant Williams’ stellar two-and-a-half-hour interview, Deden recounts a conversation he had while touring a family-run farming business. Deden said:

“This date farmer I met is an Arab and he had inherited an orchard. It’s roughly a thousand trees and he showed me around and showed me something like one hundred trees that were recently planted. And I said to him out of curiosity, “How long will it take for this to bear fruit?” And he says, “Well that particular variety, it will bear fruit in 20 years.”

So all of a sudden, I looked at the trees being harvested and realized that he couldn’t have planted them”.

The date farmer was the fourth generation of his family who worked the farm. The trees currently being harvested were evidence of ancestors who had invested in assets they knew they would never personally benefit from. We liken our investments to such an orchard. When we build high-conviction positions in a company, we do so with the mindset that we’re building a portfolio to pass on to our kids and grandkids. Before buying a stock we believe is a long-term compounder, we literally ask ourselves, “Will our grandkids think we were smart or dumb for buying this?” Our goal is that our kids and their kids will have greater opportunities to spend time on nobler tasks than the accumulation of money—we want them to be truly wealthy. The best time to start investing in that future is today.

Lastly, an exhortation to those of us pursuing the accumulation of money as a means to controlling time. It's imperative to avoid a miserly mindset even while laser focused on our craft as investors and our goal of financial freedom. Don’t neglect the precious little things of life even in the attempt to provide for them. Be aware that life is a balancing act of priorities easily tipped out of whack.

We’ll conclude as Keynes concludes his essay. It is most important that each of us, wealthy or not, live our one shot at life "wisely, agreeably, and well."

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Thanks for taking the time to read Six Bravo’s work today. If you, or someone you know, would be interested in creating an essay for the Investment Talk audience, don’t hesitate to reach out.

Thanks for reading,

Conor