I’ve seen the future—and it made me nauseous

Twice per year my school hosts an in-service for the whole school. Students stay home, we gather as faculty and staff for a plenary session in which our president offers insights about school operations, the educational landscape, or other brain pickings. We then turn to either a specific topic of concern (a societal trend that bears consideration), a divisional need (an upcoming programmatic initiative), or a dealer’s choice selection of sessions aimed at growing the professional practice of educators and support staff.

The in-service of February 2022 was an instance of the latter. An upper school faculty member hosted a session on the use of virtual reality. Stephen is an English teacher and technologist. Rooted in his studies of Victorian literature, Stephen was also an inveterate gamer and techie. So, when the school decided to seed-fund a VR lab, he and a few colleagues acquired equipment, built PCs to spec, and installed an eight-station VR lab using the Oculus rift headsets.

Stephen started by outlining best practices in using VR in the classroom.

Then, after a brief tutorial, Stephen let us strap in and explore what VR has to offer. I started with Google Earth VR. I put on my headset, and found myself looking down-valley in what I immediately recognized was Yosemite National Park. Exhibiting all the dexterity of a newborn giraffe, I floated above and around Yosemite, replaying in virtual space my hikes to Nevada Falls and Glacier Point. I paid a virtual visit to The Ahwahnee. I even flew at alarming speed out of Yosemite Valley, following the Merced River to the charming hotel that I called home for a week in 2016. The environment was fully build-out.

I was enthralled. Remembering that I was getting paid to do this, I quickly put on my Spanish teacher hat and started exploring areas for the purposes of curriculum development. I navigated to Mexico City, Puebla, and Oaxaca, only to find out that they aren’t nearly as detailed as the parking lot of the Cedar Lodge in El Portal, CA…disappointing.

However, there is certainly enough there to get kids started experiencing what major Mexican cities have to offer in terms of history and culture. A flick of my wrist and a tug on the joystick allowed me to zoom out of Central America and fly over to Cusco, Peru, which much to my delight was recreated in impressive detail.

In the main plaza, I got my bearings at El Hotel Presidente where I stayed in 2006. I swung around the square to the town’s cathedral and the adjoining Triunfo Chapel.* I tried to “walk” down Calle Laredo to inspect a wall that featured Inca foundations, precise, artistic in its geometry and engineering, that was “repaired” by Spanish colonizers with laughable ineptitude. Alas, the pedestrian road was not yet added to Google Earth’s blueprint…someday.

*Forgive the indulgence, but I have to tell you about the Triunfo Chapel. Most every major town in Latin America has a cathedral followed by secondary and tertiary churches, parishes, chapels, etc. El Triunfo is, in my thinking, one of the most significant places to visit in Latin America. 

In 1532, Francisco Pizarro brought his men down the Pacific coast of South America, a continuation of Nuñez de Balboa’s Panama expedition. In October of 1532, Pizarro and his 150 cavaliers made contact with the Inca civilization and their god king Atahualpa. One fateful day in the town of Cajamarca, the Spanish and the Inca decided to make formal introductions. Spanish troops had billeted in the buildings surrounding the main plaza of Cajamarca, effectively surrounding the plaza on three sides. When Atahualpa’s entourage entered the plaza, the friar assigned to accompany Pizarro’s expedition, a man named Vicente Valverde, raised a large cross over his head. This signaled to the Spanish soldiers the moment of attack. Swords and arquebuses poured out of the shadows, overpowered the Inca warriors, knocked Atahualpa off his litter, and effectively took control of the Inca Empire within a half hour.

In El Triunfo, much as in many Catholic churches of the time, there is a large altar. This altar is bedecked in gold plundered from the Inca territories. High atop the altar is a glass enclosure. Inside the enclosure is the Cross of Valverde. The item whose use instantiated one of the great atrocities of the last millennium sits atop that altar. When you visit, if you know the history, the place hits you with the force of history and human suffering. It really is quite an experience. 

At this point in my dalliance with Google Earth VR, I started to feel a bit queasy. I had spent 45 minutes in the virtual world. The experience is immersive, it grabs hold of your senses and doesn’t let you go until you force yourself to exit. Truthfully, I didn’t want to quit. I wanted to see more, experience more. But my body wouldn’t let me.

For the remainder of the day, I had to take short breaks for a drink of water. At times I had to sit down. This feeling stayed with me until the end of the workday…another three to four hours. My colleagues in the workshop reported the same feeling. Some had it worse than I. I think that there’s something to the nausea. I had forced my brain to do something it is not equipped to do, and it let me know that by trying to “right the ship.”

Fast forward to a few years from now.

I CANNOT WAIT! I know that the virtual world will continue to be built. Someday, hopefully soon, I want to enter El Triunfo with my students to see that ghastly cross hanging above the baroque carpentry of the altar, and to tell them the story of the siege of Cajamarca. I want them to contemplate that sometimes the world changes with the flick of a trigger, the raising of a cross, or a chance encounter between two people. I want them to experience that liminal moment of history, where what was is no longer, and what will be will is yet unknown.

I want to walk down Calle Laredo, and show my students Inca craftsmanship. But even more than what I want to show them, I am most excited about the interactions they will be able to have in this thing we will likely call the metaverse.

SOMEDAY will I be able to lead my students on a tour of Cusco? Will we be able to inhabit the same space virtually, where our likeness can see the likeness of one another, our avatars co-mingling? Will I be able to arrange meet-ups with Peruvian tour guides, historians, descendants of history? Witnesses to history? And will my students be able to ask them questions, interact with them in real-time?

SOMEDAY will I be able to bring my students, not to the Cusco of 2022, but Cusco as it appeared in 1532? Will historians and graphic designers partner with platforms such as Google Earth VR to simulate erstwhile environments? Will I be able to meet a historian’s rendering of Pizarro, Atahualpa, Valverde? Will a whole industry of virtual actors and recreationists be on hand to interact with my students?

Rather than a prepackaged AR tour guide, will VR someday allow me to interact in real-time with local experts?

SOMEDAY will VR incorporate a sense of smell or touch? After all, sight is just the product of neurons doing their thing. And so are touch and smell.

I’m excited about the possibilities of VR. Next time I put on that headset, I will come equipped with some of these questions. I’ll also bring some Dramamine.


If you want to invest in transportation companies, it’s important to have a firm understanding of intermodal. Retail banks? Net interest margin. High growth companies? You must understand how the market discounts future earnings and cash flows back to the present, especially in an inflationary environment.

Each of these examples are nuance. If you’re an income investor bent on utilities and packaged food companies, you don’t have to know any of these things.

But if you invest in any companies, regardless of sector or growth profile, you must understand risk.

Below are a two lenses through which to contemplate risk and what risk means for your investing practice.

Risk = Loss of Capital
Let’s say that this morning the <org> reported a jump in the Consumer Price Index, a measure for the cost of typical household items. The market will likely respond with a sell-off touting inflation concerns. The market is pricing in the risk that higher future prices will hamper future economic activity. Stock market drops.

If you and I understand “risk” as “any bad news that might make stock prices drop,” then we would do well to sell along with everyone else. But if we think of risk as the permanent loss of our investment capital, then most news-related drops become either a buying opportunity or an occasion to sit on our hands.

Over the last century of investing, this strategy alone has garnered incalculable returns.

Risk = Ability to remain a functioning adult
Investing is for anyone, but it’s harder on those that perpetually worry or doubt themselves. While financial independence in the future is a worthwhile goal, mental stability in the present is also pretty important.

The graph above is the secret scrawling of your psyche if you cannot identify risk as anything other than permanent loss of capital. No judgment here. Just an acknowledgment that viewing volatility as risk will force investors into the calculus of “how long can I continue to feel like this and still function as a person/employee/spouse/parent, etc.?”

Fear of volatility is destabilizing, but shame can be downright crippling. Investors that let self-doubt creep in compound shame on top of fear. All light-hearted jibing aside, this can lead an investor down some very dark paths:

“I’m stupid.”

“I should have known better.

“I should have followed my gut.”

(You’re not.)

(You couldn’t have.)

(Your gut is a coward that always tells you to do two opposing things just to cover its bases.)

Permanent loss of capital or temporary loss of sanity
Whether you’re assembling a portfolio of utilities companies yielding 4% or tech stocks you expect to 4x over the next 10 years, you need to decide not just your risk tolerance, but your definition of risk itself.

The majority of my capital is in retirement accounts, so my time horizon is just under 20 years. What money I do have in taxable accounts is money I don’t need in the immediate term. For these reasons, I’m capable of taking risk and keeping my hat on, but only because:

  • My main positions (about 35 companies, each representing 2-5% of my overall portfolio) are companies that I believe will not fail. While many will have swoons of 20% or more, and some will have crashes of 60% or more, they will continue to be excellent companies led by ethical, responsible management. They will continue to represent leading companies in important industries. They will continue to possess some form of competitive advantage—be that price, brand, patents, switching costs, market dominance, high barriers to entry, etc. — some advantage will keep them relevant in the market. Thus, I will never* risk permanent loss of capital.
  • The remaining companies are lottery tickets. They very well may go out of business tomorrow. Their management team may be a gaggle of hoodie-wearing, Rumi-quoting narcissists with a bad gambling addiction. Their products may never clear FDA hurdles or may get eclipsed by a more competent company’s offerings. Their office building might burn down, and since Kyle didn’t take a screenshot of the design specs like I told him to, the widget they invented that would someday change the world is lost to the ages. In short, anything can go wrong.

    If you pooled them together, I’d be amazed if they constituted more than 5% of my portfolio. If I were 20 years younger, that percentage might well be three times greater. But being in my mid-40’s, I need remain a functioning adult. My wife needs me, my students need me, my cat needs me. So I keep the lottery ticket weighting laughably low. As Monish Pobrai said, “Heads, I win. Tails, I don’t lose much.”

*Earlier in this post I used the word “never.” Know that “never” is a relative term. “Never” means “unlikely enough for me to worry about it. Nothing more.

Science, but not science class

“Science, my lad, is made up of mistakes, but they are mistakes which it is useful to make, because they lead little by little to the truth.”

Jules Verne

Science class, or any other class, is made up of mistakes that carry a discounted grade and perhaps a discounted sense of self.

The education we sell, the one we wish for for our kids and the one we seek for ourselves, is best achieved by those that can tune out the bell ringing, point deducting, grade norming, and finger pointing.

In order to thrive in the “fail up” sales pitch of modern school culture, you must first have been imbued with high self-esteem, been born to the parents that get it, and been assigned to the teachers that don’t use grades as weapons.

In other words, you have to have won the lottery.

What if work were assessed using rubrics rather than grades? What if your report card were a digest of the type of work you tend to deliver, rather than a derivative numerical abstraction of the same? What if your final mark, if such a thing were necessary, were a measure of your improvement over time, rather than the mean of your performances over time?

What if your work, both the successes and the mistakes, were seen as the thing that leads you little by little to the truth?

Being early is indistinguishable from being wrong: Ford Motor Company

There have been a number of companies I’ve owned multiple times in my investing practice, among them Amazon, Home Depot, Apple, Walmart, and Ford.

While all but the latter have delivered satisfactory gains, Ford seems to be the one that I always seem to get wrong. But was I wrong or was I just early?

I was wrong.

My first position in Ford was in the early 2000’s and I barely have a memory of it because I didn’t start tracking and journaling about my investments until 2006. So, let’s call that initial position a mulligan.

The second time I owned it, the company was emerging from the Great Financial Crisis (2007-2009). CEO Alan Mulally took the helm in 2006 and in a stunning act of clairvoyance, mortgaged Ford’s assets to secure billions in loans in order to strengthen the company’s balance sheet and provide capital for a makeover of the company.

It’s better to be lucky than good.

The Great Financial Crisis, which included Torquemada-like scrutiny of loan servicing operations (like those of car companies that both build the car and provide the financing for consumers to buy said car), resulted in the bankruptcy of two of the three major auto companies. Of the “Detroit Three,” Ford was the only one that did not require government assistance.

In other words, I really liked the leadership of the company. So in 2010 I took a stake in Ford yet again at around $12. I held it for two years, watched it drop to $9, rebound to $12, where, fatigued, I sold it for a modest loss.

This is where I should say something to the effect of “but if I held it for a long term, patience would have paid off.” But it wouldn’t have. At this moment, Ford trades at around $15, so a long-term position in Ford would have netted around two and a quarter percent year-over-year gain…hardly a windfall.

And yet, as the title of this post suggests, I believe that Ford is worth looking at. They were not early to the electric car market, but they’re taking it seriously, and I believe they could hold a #2 market position within a few years.

Mulally was a brilliant executive because he excelled at building brand equity, communicating authenticity, and he was a very good capital allocator. The not-worth-mentioning leaders of the company that followed wanted Ford to be a ubiquitous car manufacturer or a historic car manufacturer or a cutting-edge car manufacturer. But they were not concerned with Ford being a profitable car manufacturer. The current CEO Jim Farley loves cars and he loves profitability. He’s closing down unprofitable lines and positioning EVs where they will get the most traction: The Ford F-150 (a marriage of torque and utility) and the Mustang (a marriage of torque and tech).

Ford is not early to the push to EV fleets. Its stock price reflects this sentiment. Its PE Ratio of 15 is low relative to its 5-year average of 17.7. Enterprise Value to EBITDA (a decent proxy for valuation based on cash flows) is 8.2. I like to see EV/EBITDA for most companies between 10-15, but auto companies usually trade at a discount to the market in PE and EV/EBITDA (Ford’s historical average is 8.6), but this includes significant drag from unprofitable production lines that have already been mothballed.

Bottom line: For the third time in my life, I have opened a position in Ford, and will be looking to add to that position over time. Ford looks wrong…again. But with good leaders in charge, they might just be early.

Fear filled with reasons

What follows is an apocryphal sound bite from financial media inspired by the events of a day in mid-July 2021. This quote could very well take place on any given day, a few dozen times per year, with dates, parties, and events interchangeable:

A seven-day positive streak in the markets was broken with the news that Google is being sued for anti-competitive practices related to the operation of their app store. As this news broke, we’ve learned that the Japanese government decided to ban spectators from the upcoming Olympic Games because of the worrying surge in COVID cases. Additionally, labor numbers, employment numbers, news of a hurricane approaching the Atlantic coast, and a half dozen other things that are freaking us all out has led to a several-hundred point drop in the Dow Jones index.

Like I said, replace Google with Apple, replace Tokyo and Olympic with Europe and tourists, and you’ve got a whole new news day filled with reasons to be fearful. Reasons to be negative.

But are these reasons filled with fear or fear filled with reasons?

Often and especially after sequential days of positive movement in the indices, the market turns negative and starts to look for reasons to justify that negativity. The usually turn to macroeconomic indicators or force majeure headlines like extreme weather or, in the case of 2021, COVID numbers. If we see beyond this “fear filled with reasons” tendency, the mindful investor can capture the opportunity to open or add to a position otherwise avoided due to high valuations.

In order to identify these moments of market inefficiency, it’s helpful to identify what it is that you DO fear.

Here’s what I fear:

  • Long-term economic decline
  • Permanent decline in birth rate
  • Lack of faith in business and industry
  • Hyperinflation
  • Threats to democracy and the rule of law
  • Large-scale war that includes nuclear and/or biological weapons
  • Irrevocable ecological destruction brought about by climate change

Of these items, the only ones I’m legitimately concerned about are war and climate change. War could very well happen tomorrow and there’s nothing I can do about it. And if my orbit does become impacted by weapons of mass destruction, I’ve got bigger problems than my portfolio balance. Climate change probably won’t permanently impair our way of life until well after I’m dead. So, from an investing perspective, I don’t have any reasons to be fearful.

The media and the market will give you as many reasons to be fearful as you have time to dream up. Incorporate them into your investing strategy at your own peril.

In two ways, these actors are doing you a favor.

First, they are forcing you to envision the near future as something other than what it is—relatively safe and relatively predictable. The day journalists get on the news and say “Everything’s swell” is the day I will head for my basement closet.

Secondly, every time someone, whether a media personality, a politician or a fund manager gets on TV and enumerates the things you should be scared of, they present a buying opportunity for those of us fortunate enough to know what we know.

The world is relatively safe, relatively predictable, and over 80% of Google’s revenue still comes from advertising. Buy $GOOG.