18. Invest Like A Business Owner

Apr. 26, 2022, App Economy Insights

Summary

• Macro news and market volatility tend to dominate financial headlines.
• In this context, it's increasingly difficult to separate noise from signal.
• As investors, the biggest challenge is to keep our emotions in check.
• Investing like a business owner is the most powerful way to do so.
• Let's review how to do it and why it can be so beneficial.

As you look for opportunities to invest money you've saved, there should be no difference between buying a house, a farm, or a business.

If you are a homeowner, you're probably not assessing the value of your home every day on Zillow, wondering if you should sell when the Zestimate is down 15% from its previous high. You wouldn't sell your home because you just found one in which you have "slightly more conviction."

The problem? We interrupt the power of compounding, the most important driver of wealth creation in an investing process. Instead, investing should be 1% buying and 99% waiting. As best put by Charlie Munger:

The first rule of compounding: Never interrupt it unnecessarily.

One of the best mental models is to invest like a business owner. Warren Buffett explains:

People would be better off if they say, ‘I bought a business today,’ not a stock today because that gives you a different perspective on it. You don’t buy or sell your business based on today’s headlines.

1. What you buy.
2. How you buy it.
3. Your time horizon.
4. Your perspective.