Compounding Snowballs

Social responsibility means that as an individual or a corporation, you have a civic duty to use your actions to benefit the population. If corporate social responsibility (CSR) is about making a "greener" impact on the environment, creating a diverse and accepting workforce, and/or benefiting society over the long-term, why is it so hard for companies to do? The short answer is the long-term.  People and companies too often focus on the short term: how much money their company will make this quarter. If their drive is making money in the short term, then as Jeremy Grantham says, " G randchildren have no value … We deforest the land, we degrade our soils, we pollute and overuse our water, and we treat our air like an open sewer. All of this is off the balance sheet and off the income statement ".  As a value investor, I look at the potential growth, competitive advantage, fair price, and good management within the company. As a socially responsible investor, th...

Ensemble Capital gave me a wonderful chance to speak to a lot of young people about my book and my story. Here is a write up of some of the questions I was asked by Todd Wenning : Todd Wenning: The title of your book is Early Bird: The Power of Investing Young . Why is there such power in investing when you’re young? Maya Peterson: I am sixteen years old. As a young person, I do not pay rent and I cannot drive myself places yet, but I can invest. Investing is one of the first adult choices a young person can make. It is very powerful to make the choice to invest your money rather than spend it right away. Investing is a decision that will impact your future. Also because you’re young, you have a lot of time ahead of you which maximizes the concept of compounding. Compounding is the idea that if you have a small ball of snow at the top of the hill as it rolls down, it will continue to get bigger. In reality, time is the hill and snow is your investments, so an ideal situation i...

Erin Lash is the Director for Consumer Equity Research at Morningstar Inc. She specializes in the sector of consumer staples (foods, household and personal care companies). Erin Lash has been working as an equity analyst since 2006. She was very kind to answer quite a few of my questions on consumer staples.  How frequently do consumers switch consumer staples products, and is there a common cause to that behavior?  There are no meaningful switching costs for end consumers. But leading players maintain the resources to support their brands at the shelf and defend their share position against the encroachment of smaller foes. We view marketing as a cost of doing business (not a source of competitive edge), since even value-added new products can fail if consumers don't know about them. However, this differentiates brands from private-label fare, where innovation and ad spend are deficient. Firms competing in commodity-like categories (where products turn fast and are...

My fifth grade teacher (I will call her Ms. R) recently invited me back to my former middle school to talk to her current class. I talked about what drives me, what it takes to be a good student, and somethings to expect in the years to come. I hope you enjoy a variation of my talk. Before I share what I talked about, I want to disclose that some of what is written below can be found on previous blog posts and ValueWalk . "You don't have to be great to start, but you have to start to be great." When my Ms. R would tell us this, it meant nothing to me as a ten year old. Looking back on it now, the only thing I can think about is how perfectly this describes my story. I am currently in ninth grade. To understand my story, we have to first understand how I got started in two businesses: the jewelry business and the camp business. When I was in 4th grade, I decided to start a business. I don’t believe it had a name, but I was extremely proud of it. I made earri...

“Quis furor, ô cives” – Lucan              “What madness was this, my countrymen?” This quotation was in Lucan’s civil war epic but is equally applicable to the craze caused by a financial bubble. Looking back on times where investor’s decisions making ability was impaired by a forming bubble, there is no other word that comes to mind than madness . This so-called mania is a product of investor’s susceptibility to decision making affected by biases. Investors revert back to simple beliefs or biases like correlation is causation, or it is easier to attribute success to skill, although luck was the only thing that affected their success. These biases send investors into crazes of overconfidence and constant self-attribution that are all traits investors attempt not to possess. The infatuation that comes over an investor throughout the time of a bubble is similar to that of the Botrytis Blight disease that inhabits the beloved Dutch...