My family moved around a lot when I was young, but no matter where we were living, we made the pilgrimage to Rockford, Illinois each year to visit our extended family. One of my fondest memories was waking up at the crack of dawn on Saturday mornings and running downstairs to find my grandfather already hard at work.
He’d be sitting at the kitchen table perched over the classifieds section of the local newspaper with his red pen circling which garages sales we’d be hitting later that day. The more red circles, the more excited I got. Then, after a big breakfast and some cartoons, we ventured out together giddy with anticipation of the treasures we might find.
My grandfather had a system. He first hit the garage sales that he determined offered the best opportunity and conducted a thorough assessment of all inventory. When he targeted something of interest, the brutality began so slowly that his prey was oblivious to the inevitability of their demise. It was a lot like watching Michael Jordan inbound the ball with a minute left on the clock. I never knew what to expect, but I was pretty sure it was going to be amazing.
His credo was “no item is too junky, and no price is too low.” He’d spend ten minutes beating up the seller to save a quarter on a lamp, and in the rare instance when the poor soul didn’t cave, he walked away. Then at the end of the day, he’d return to see if that lamp was still available. If so, he’d offer two quarters less than his original offer to teach the seller a lesson.
After a productive day, we returned to his house and put all the junk he bought next to the rest of the junk in the garage. But make no mistake, my grandfather was no hoarder. That garage was his warehouse, where he accumulated inventory over the year. Once all those knickknacks were repaired and refinished, he then hosted his own garage sale so he could flip it all for a higher price.
His garage sale was the talk of the town every year. It attracted so many cars that neighbors complained about the congestion (after they finished shopping of course). He also kept copious records of all transactions to gauge his profitability and to track what was selling and which goods had fallen out of favor.
Said another way, this was more than a hobby for him. My grandparents didn’t have much, nor did they live an extravagant lifestyle. So, making a few extra grand every year was a big deal to them. That extra cash helped them sleep better at night and made their golden years more comfortable.
The Bottom Line
My grandfather wasn’t much different than most other depression-era guys. He got married right after high school, was drafted into World War II soon thereafter, and then came home years later to a son he met for the very first time. College wasn’t an option, let alone climbing the corporate ladder, so he got a job in a factory and stayed there until retirement.
But it didn’t take a formal education for him to master skills like discipline, patience, and suppressing emotions. That’s what enabled him to walk away from bad deals and avoid bidding wars. He never jumped for joy or high-fived anyone after a big win (except maybe to indulge his grandson’s elation), nor did he panic over the fear of missing out. Meaning, he may not have been a businessman per se, but he still treated garage sales like a business.
He also had an edge, and he knew it. He’d lived in that neighborhood for decades and knew which houses hosted the best garage sales and which neighbors were the weakest negotiators. He’d also been buying and selling trinkets for years, so he had a pretty good idea how much an old record or lawnmower was really worth and how quickly it could be sold at a larger and better venue (his garage sale).
I often think back to those Saturday afternoons and wonder how much of my decision to become a professional investor was shaped by watching my grandfather in action. That’s because when I think about my job, it isn’t much different than scouring garage sales looking for deals. Sure, the goods are fancier and venues are highly regulated, but in the end, financial markets are still just markets. They are governed by human behavior, and winners are the ones with an edge and the discipline to keep emotions in check.
The parallels are even more striking because investing is one of the few professions I can think of where a novice with zero experience and education can achieve success. Think about it. Surgeons and litigators spend years perfecting their trade. Beginners wouldn’t stand a chance in the operating room or in court, but fancy degrees, residencies, and clerkships are neither prerequisites nor assurances for investing success.
Lastly, it’s been a reminder to me to always approach complexity with extreme skepticism because it’s the perfect disguise to cloak the rampant laziness and inability of the investment industry to simplify. Reveal complexity to intimidate and sell sophistication to liberate. It’s a profitable playbook for an incumbency that has little incentive to change. As Albert Einstein famously said, “If you can’t explain it to a six-year-old, you don’t understand it yourself.”
The bottom line is that something as basic and commonplace as a garage sale is not much different than something as massive as the $50 trillion U.S. stock market1. Keep that in mind the next time a concept seems too hard to grasp or a salesperson tries to dazzle you with industry jargon.
This newsletter/commentary should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.