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Investing Rudiments

I'm often asked about investing advice, and really the most important tip is to invest in companies that focus on rudiments.  This technique reveals the real, tangible qualities of companies that bear intrinsic and meaningful value.

Knowledge

The most valuable commodity in business is knowledge.  All businesses, ultimately, exist to act on and discover knowledge that enables their business to succeed.  Pay attention to businesses that are at the frontier of innovation in one or more domains; these businesses embrace rapid iteration and take important risks to make their products better.  The companies that can innovate like this are usually either top performers in their industry, with well funded and highly emphasized R&D departments, or agile startups that earn trust in the industry through unique innovations.

As an investor, you will find the most success investing in things that you yourself are knowledgeable about.  You will have the best sense for what is valuable about different companies in a given industry, and you can feel the temperature of the market based on industry news.  Being a knowledgeable investor means that you can see into and through specific challenges in a given industry, and you might even be able to foresee future challenges before they are widely known.

Before you invest, make sure you can explain what makes a company uniquely valuable in their industry.  Consider what competitors are doing, and whether you believe the company is well positioned to compete in current and future industry trends.

Responsibility

Responsible stewardship is abundantly important in the modern, globalized economy.  Companies are increasingly being held accountable to enact good in the world, making their customers freer, more knowledgeable, happier, healthier, and safer.

Businesses which succeed continually, over varied circumstances and in innovative ways, are equitable.  Equity is a quality of bearing, in the sense that a company which is by and for its customers is so much its own customer that it may always be bringing about positive change for the people that use their products and work for the company.  Notice the trajectories of different players in a given industry, and to what extent they are able to uniquely do good by their customers.  A company which is close to their customers and close to industry knowledge has skin in the game, and is often in a good position to be a steward within the industry.  Apple and Mozilla are two technology companies that take a model stance on industry ethics and defending the liberties of customers.

Agility

Successful companies iterate fast.  They're pushing the limit of industry knowledge, following bold intuitions, and recognizing what does and doesn't work.  There are many important factors that play into whether a company can easily adapt, but I think one good rule of thumb is autonomy.  If a company is autonomous in an industry, they can quickly innovate and avoid limitations felt by the rest of the industry.  Where other companies might be set back by particular processes or corporate inertia, an agile company may be able to build new technologies or experiment with processes in a way that revolutionizes an industry.  Autonomy is a powerful force for a company as a whole, and also for individual teams and employees at a company.  When employees feel like they can make meaningful decisions and take action where needed, they are always set up for success in their job.


In conclusion, there is a lot you can learn about companies just by understanding their culture, products, and customers.  Notice there has been no mention of technical analysis, indicators, or trend trading.  If you really want to invest at the leading edge, you need a deep understanding of an industry that penetrates beyond whatever the market is doing.  I've found following the news and my intuitions to be much more straightforward and rewarding.

Solstice
Glacial Spring