Quote of the Day: Design It for Fools

 

“Always invest in companies that could be run by any fool because sooner or later one will be running it. It’s funny, from dog clubs to HOAs to the US Congress to major corporations, events collude that cause humans to put idiots in charge of their affairs. It only isn’t the rule in small firms and start-ups. Not that it doesn’t happen there, but they fail so quickly that the public doesn’t become aware.” – Peter Lynch, Fidelity Magellan Fund

Peter Lynch led the Fidelity Magellan Fund from 1977 to 1990. In those 13 years, the fund posted an average annual return of 29%, building assets from $20 million to $14 billion. At that growth rate, your money doubles about every 2.5 years. Of course, the stock market was relatively moribund during the 1970s, due to oil embargoes and Jimmy Carter’s “malaise” economy. After Reagan took office, the economy boomed, which explains a significant portion of the gain. But in the quote above, Peter Lynch identified a truth about complex systems and management. The question is “how robust are the country’s important systems to fools?”

Like with Jimmy Carter, our country stumbled badly during the eight years of Barack Obama. Other than the tremendous boost of oil and gas fracking, many other industries barely held on or declined. We’ve seen good growth since 2016, but do we have the infrastructure to continue this progress? Without the rule of law and honest information, can the people as a whole choose wisely their part in the system?

During the 1980s, telecommunications and computers caused many items to become obsolete, such as typewriters and landline phones for most consumers. Yet the basic business structure thrived in this environment, even with foolish decisions. The question remains about how we emulate this growth of the 1980s in spite of the fools.

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  1. Vectorman Inactive
    Vectorman
    @Vectorman

    Vectorman: Always invest in companies that could be run by any fool because sooner or later one will be running it.

    Example: HP with Carly Fiorina.


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    • #1
  2. KelseyShockey Inactive
    KelseyShockey
    @KelseyShockey

    The great part of the American Economy is that it seems to break through despite the restraints of politicians and bad decisions of businessmen.  Innovation has always driven us forward.  I cannot imagine what will be next, but someone is working on it now.  The best thing we can do is give them the economic conditions, regulatory environment, and intellectual property protections tho thrive.

    • #2
  3. Arahant Member
    Arahant
    @Arahant

    Yep. It’s true.

    • #3
  4. Vectorman Inactive
    Vectorman
    @Vectorman

    KelseyShockey (View Comment):

    The great part of the American Economy is that it seems to break through despite the restraints of politicians and bad decisions of businessmen. Innovation has always driven us forward. I cannot imagine what will be next, but someone is working on it now. The best thing we can do is give them the economic conditions, regulatory environment, and intellectual property protections tho thrive.

    I agree with the above, but can we also include restraining politicians such as AOC?  ;-)

    And welcome to Ricochet!

    • #4
  5. Kelsey Shockey Inactive
    Kelsey Shockey
    @KelseyShockey

    Vectorman (View Comment):

    KelseyShockey (View Comment):

    The great part of the American Economy is that it seems to break through despite the restraints of politicians and bad decisions of businessmen. Innovation has always driven us forward. I cannot imagine what will be next, but someone is working on it now. The best thing we can do is give them the economic conditions, regulatory environment, and intellectual property protections tho thrive.

    I agree with the above, but can we also include restraining politicians such as AOC? ;-)

    And welcome to Ricochet!

    HA! I mostly ignore her.  She’s a lightweight and cannot hold back the train of American Ingenuity very long!

    And thanks.  I should have done it long ago.  I feel at home.

    • #5
  6. Keith Rice Inactive
    Keith Rice
    @KeithRice

    I thought I’d come up with the term “institutional entropy” … it’s a powerful concept but I’ve never seen it talked about. Maybe because it’s a metaphor for old age and death people tend to avoid it. Of course the difference between people and institutions is that the latter can theoretically be indefinitely revitalized.

    Unfortunately I believe the culture of empowering the mediocre is going to have lasting effect. Where legal advice is to keep and promote the fools to avoid a devastating lawsuit, the lions get driven out by the foxes and entropy, well ahead of schedule, ensues.

    So it’s generally lowered expectations but there will still be moments of brilliance and innovation that even Diana Moon Glampers can’t damper.

    • #6
  7. MichaelKennedy Inactive
    MichaelKennedy
    @MichaelKennedy

    Remember all the fracking when Obama Was in office (and which he now trying to take credit for) was on private land. Public land was banned. Bill Clinton took millions of acres out of mining to suit his friend and donor in Indonesia.

    https://climatechangedispatch.com/utah-monument-was-a-reward-to-a-clinton-donor/

     

    A large part of America’s energy dependence on foreign sources can be traced back to September 18, 1996, when Hillary’s co-president hubby Bill Clinton stood on the edge of the Grand Canyon on the Arizona side and signed an executive proclamation making 1.7 million acres of Utah a new national monument, the Grand Staircase-Escalante National Monument:

    President Clinton officially set aside 1.7 million acres of Utah canyonlands Wednesday as a national monument, with some concessions to Utah authorities who complained the move would stunt the local economy and block a job-generating coal mine.

    Standing against the sweeping backdrop of the Grand Canyon, Clinton declared that in creating the Grand Staircase-Escalante National Monument “we are keeping faith with the future… On this remarkable site, God’s handiwork is everywhere.”

    But officials trod carefully around the issue of the planned coal mine, which was to be dug by Andalex Resources, a Dutch company, on a leased site on the Kaiparowits Plateau, considered one of the new monument’s most remote and valuable sites. Under current plans, 50% of the coal mined from the plateau would be exported from the Port of Los Angeles.

    In his remarks, Clinton implied that he intended to block the mine, which some have said could produce high-quality coal with a value of $1 trillion.

    So why would he dedicate a Utah monument while standing in Arizona? Well, this federal land grab was done without any consultation with the governor of Utah or any member of the Utah congressional delegation or any elected official in the state. The state already had six national monuments, two national recreation areas, and all or part of five national forests. Three-quarters of Utah was in already in federal hands.

     

    Why would he ?

    James Riady was the son of Lippo Group owner Mochtar Riady. Young James was found guilty of and paid a multi-million dollar fine for funneling more than $1 million in illegal political contributions through Lippo Bank into various American political campaigns, including Bill Clinton’s 1992 presidential run. Connect the dots. Riady’s relationship between the Clintons would be long and corrupt, even extending to donations to the Clinton Foundation.

    Clinton took off the world market the largest known deposit of clean-burning coal. Who owned and controlled the second-largest deposit in the world? The Indonesian Lippo Group of James Riady. It is found and strip-mined on the Indonesian island of Kalimantan.

    • #7
  8. TBA Coolidge
    TBA
    @RobtGilsdorf

    Keith Rice (View Comment):

    I thought I’d come up with the term “institutional entropy” … it’s a powerful concept but I’ve never seen it talked about. Maybe because it’s a metaphor for old age and death people tend to avoid it. Of course the difference between people and institutions is that the latter can theoretically be indefinitely revitalized.

    Unfortunately I believe the culture of empowering the mediocre is going to have lasting effect. Where legal advice is to keep and promote the fools to avoid a devastating lawsuit, the lions get driven out by the foxes and entropy, well ahead of schedule, ensues.

    So it’s generally lowered expectations but there will still be moments of brilliance and innovation that even Diana Moon Glampers can’t damper.

    I had forgotten her name, but never her deeds. 

    • #8
  9. Steve C. Member
    Steve C.
    @user_531302

    Keith Rice (View Comment):
    the lions get driven out by the foxes and entropy

    Follow the lions.

    You can’t keep a good carnivore down.

    Peter Lynch had some thoughts about investing in gold.

    (paraphrasing) While the idea of having some gold looks good on paper, if things fall apart, you’d be better off with a stock of ammunition and canned goods. 

    • #9
  10. EB Thatcher
    EB
    @EB

    Magellan was pretty good to me.  In 1986, I put $2,000 in Magellan, because that was the last year you could take the full IRA contribution as a deduction.  Then I kind of forgot about it.  I’m sure I got the periodic statements, but I was traveling for a living and “loving life,” so I forgot.

    When I got married 10 years later, I took a look and that $2,000 was now $16,000.  What a nice surprise.  Now, I could think: “If I had only put in more money.” But I choose to think:  “Well, all I did was breathe in and out for 10 years and now I have $16K.”

    • #10
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