Most of us have read or had read to us, one version or another of Aesop’s fable The Tortoise & The Hare at some point during our adolescent years.
Little did we know it at the time, that its ambiguous lesson applies to multiple facets of life, including….the allocation of capital.
The short story, elongated and revised goes a little something like this:
There was once a hyper-active money manager named Mr. Hare who bragged about how fast his computerized algorithm’s were and how quickly his portfolio’s churned.
Despite generally ignoring his unabashed boasting, the small, but intelligent investor aptly titled A. Tortoise, challenged him to a competition of sorts, a race if you will. He said my un-adjusted returns in three year’s time will be better than yours, in relative terms.
All the stock commentators, analysts and business journalists gathered to watch.
Mr. Hare paused for a moment but remained unfettered , looked back at A. Tortoise or “Slow & Steady” as he called him and cried out, “How do you expect to win this race when you are plodding along at your slow, slow pace?
Mr. Hare stretched his feet over his mahogany desk and fell asleep, more than confident that any slight mis-pricing in the efficient market will quickly be spotted by his computerized wonder and it’s Phd programmers.
Slow & Steady researched and researched. He never stopped researching until he crossed the proverbial finish line and found what he had been looking for all along.
A simple business whose underlying characteristics he understood intimately, operated by competent, kind and trustworthy people and lastly one which met his final test, that of a distinct margin of safety between the price it was offered to A. Tortoise to buy and the business’s true intrinsic value.
The people who had gathered to watch were a bit surprised and amazed all at once, but impressed by his results began to cheer so loudly for A. Tortoise, they woke up Mr. Hare. Mr. Hare stretched and yawned and even began doing some minor research himself after seeing his own results languishing, but it was too late.
Three year’s time was up and A. Tortoise had crossed the finish line in rather spectacular fashion.
After that, Mr Hare would have been wise to remind himself, “Don’t brag about your lightning pace, for Slow & Steady and his unusual methods (at least in his mind) won the race! But alas, Mr. Hare’s memory span was rather short and he began the same process anew once more.
– The End –
As we have learned, some early interpreters of this fable had it right, when they said “The more haste, the worse speed”.
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