“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 chose 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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