Post by Nate Paul
The latest and greatest smartphones are released every twelve months, rendering the last model about as useful as a paperweight (if you believe the marketing hype). An entire industry has been built around Silicon Valley’s cult of disruption, a belief that we should always be replacing our old way of thinking and doing with new and exciting ideas.
It seems like nothing is safe from our love affair with newness. In the coming years, cars will relieve us of the burden of sitting behind the wheel and smart refrigerators will relieve us of the worry of remembering to pick up milk.
Don’t get me wrong – I love technology. In fact, one of the most gratifying parts of my job is working with software and technology companies and the growth of their businesses. It’s hard not to be excited by the endless ways that innovation will change our lives for the better in the years to come.
But while many of my friends and colleagues spend their free time reading about the future of robotics and artificial intelligence and thinking about how the Internet of Things will change our daily lives, I far more often find myself thumbing through decades-old issues of Forbes, Businessweek or Fortune, soaking up as much insight as I can from great dealmakers now relegated to the history books.
One mainstay on my nightstand is a battered old copy of Business Adventures by John Brooks that I bought from an actual bookstore (not online!) when I was in high school. The book was originally published in 1969, but the insights remain astonishingly relevant today. The passage I probably re-read the most is about the Ford Edsel fiasco, which is the ultimate cautionary tale about the importance of paying close attention to your market and being ready to respond when your customers’ preferences and demands change. It’s no surprise to many that the business leaders I admire, including Bill Gates and Warren Buffett, are fans of Brooks and his timeless wisdom.
One of the core lessons the greatest investors and business leaders share is an obsession with the fundamentals. In hot markets like today, in which unicorns and pre-revenue billion dollar valuations grab all the headlines, it’s easy to lose sight of the basics.
But sizzling markets and the lure of quick profits is nothing new. When I started investing in real estate in 2007 while still a college student, the market was saturated with speculators. The previous few years had seen unprecedented capital growth in the residential and commercial markets, and suddenly everyone was a developer or a flipper. Finding properties that were undervalued and had strong fundamentals was extremely difficult at the time, because the competition was snapping up everything they could find and counting on never-ending price appreciation.
Going against the grain, I began building my company by obsessing over the fundamentals – intrinsic value, recurring cash flow, and a long-term investment horizon. When the real estate market collapsed in 2008, I managed not to panic or flee, and once again went against the grain, becoming one of the most active buyers of real estate in Austin…then Texas…and eventually, the nation. Following Buffett’s advice, I was fearful when others were greedy – and then positioned to be greedy when others were fearful.
This old school approach doesn’t just apply to investing, it applies to almost every aspect of building and running a company. In business and investing, cautionary tales are everywhere – from the one-hit wonder Wall Street fund manager who delivers one knockout year and then flames out, to the Silicon Valley rising star who builds a killer app and is never heard from again. Those of us who have achieved success at a young age should be terrified by these examples. I’m driven every morning to build a company that creates jobs, wealth and economic opportunity not just for years, but for generations. I can’t imagine how to do that except for being a student of history.
I’ve never liked the old saying that those who don’t study history are doomed to repeat it. To me, history is a goldmine of proven ideas just waiting to be uncovered. It may just be that the “Next Big Thing” happened long ago.