Mitochondrial Investing: Survive and Thrive

First and foremost, I’d like to thank you all for taking the time to visit my little corner of the interwebs. Family and friends have, for some time, suggested that I share my musings with others so I finally cracked and decided to take the leap by starting with this blog. Since I've been learning about, researching and investing in Bitcoin and other crytpo assets of late, I thought, why not on Steemit? Needless to say, I’ve had an interesting journey up to this point.

I started out as a formally trained construction and civil engineer (Boiler Up!), spending time managing commercial and industrial construction projects. Eventually, my passion for investing took over as I moved from construction to finance and investing, including earning my CFA Charter. It’s been a fun ride to this point and look forward to what the future holds.

Now, I’m sure you’re probably asking: “What do mitochondria – a subject of biology – have to do with finance and investing?” I thought the same thing at first, but I the more I delved into the topic, the more it made some sense in analogizing with investing.

The basics of the mitochondrion is that it is a component of a single cell that is found in all eukaryotic organisms. As a quick history lesson, eukaryotic cells appeared around 3.8 billion years ago as a result of a cataclysmic event whereby one bacterium with a mitochondrion was engulfed by another bacterium without a mitochondrion. This collision gave rise to a single eukaryotic cell, which eventually evolved into multicellular eukaryotic organisms (i.e. fungus, plants and animals to name a few).

The Mitochondrion

These mitochondria generate most of the cell’s supply of adenosine triphosphate, or ATP, which is a source of chemical energy. So, again, you might be thinking: “Who cares about this ATP producing cellular component?” Well, in reality, without that cataclysmic event all those billions of years ago, multicellular species could have never evolved.

(Think about yourself as an individual and everything that is going on right now as you are sitting here reading this article. You’re thinking (brain), you may be slightly moving (muscles & brain), or your stomach may be growling (digestive system). These actions are all enabled by the production and consumption of ATP; it takes great amounts of energy for multicellular organisms to grow, thrive, prosper and reproduce. In essence, without the mitochondria, life would have never become what it is today.)

The reason I chose to associate investing with the mitochondria is because I believe the process of investing is like the process of mitochondria creating energy. The mitochondrion is the powerhouse of the cell that creates energy from nutrients allowing organisms to grow, just as an investor utilizes available information (nutrients) to break down the merits of an investment in order to potentially attain a positive return in the future (creating energy and growth).

Additionally, investing can also be thought of as survival of the fittest, just as with biology. In biology, survival is the key to reproductive success; in investing, survival – as I will discuss about through capital preservation in later posts – is the key to future investing success. (As a side note, ask Bill Ackman about capital preservation after his fund lost nearly $4 billion on Valeant Pharmaceuticals.)

So the question remains, how do we as investors survive? In his 1859 book, On the Origin of Species, Charles Darwin concluded that nature selects for the strongest, i.e. “natural selection,” the basis for evolution. For example, the species that creates greater numbers of future generations on a net basis – birth rates being greater than death rates – will likely survive and thrive.

Effectively, we can take those lessons from Darwin and the mitochondria’s rise as a way to become better investors in the future. It’s not easy finding great, long-term investments that will compound wealth over time, but when we do, they tend to be the types of companies that both continue to provide value to their customers and adapt over time to continue providing returns for investors. (I would urge you to read the book The Outsiders by William Thorndike, paying close attention to the chapter on Teledyne as an example.) By understanding what drives a company’s business – both from a risk and catalyst standpoint – we can better evaluate the potential growth of that business in order to better determine the amount of “energy” it may create for us as investors in the future.

What it boils down to is this: just as with the mitochondria – the powerhouse of the cell creating energy to drive the overall functioning of an organism – an investor must be able to break down the components of a potential investment in order to provide a basis with which to make investment decisions, and therefore create positive returns on a net basis so as to grow, survive and thrive in the future.

So, thank you mitochondria, because without you, we wouldn’t have multicellular organisms. And thank you, Richard Altman, for establishing the mitochondria as cell components, or as you called them “bioblasts.” Without your discovery, our understanding of multicellular organism may not have advanced to its current state. I also can’t forget Charles Darwin, who realized there was a rhyme to the reason of biology and that it’s not all random. (Thanks Chuck!) And finally, thanks to all of my investing influences, including, Benjamin Graham, Walter Schloss, Warren Buffet, Seth Klarman, Howard Marks, Martin Whitman, Mohnish Pabrai and a whole host of others who have provided me with inspiration and education that set me on my current path of professional investing.

As the late, great David Bowie once said: “I don’t know where I’m going from here, but I promise it won’t be boring.”

Regards,

The Mitochondrial CFA